BANKING
| RBI eases norms to help India Inc increase global footprint Fri, 27 May 2011 15:17:31 GMT |
| MUMBAI: In order to encourage Indian companies to expand their global footprint and showcase entrepreneurial skills, the Reserve Bank today relaxed norms for overseas direct investments. The regulations relating to overseas direct investments, RBI said in a circular, are being liberalised "with a view to providing more operational flexibility to Indian corporates having investments abroad". The modified norms will provide greater freedom to domestic companies like Tatas , Bharti and Reliance to increase their commitments in overseas joint ventures and subsidiaries and also help them repatriate funds without seeking prior approval of the RBI. "The move is in recognition of entrepreneurial ability of India Inc by the Reserve Bank. It is a welcome step and will help companies grow on a global stage", said Ashvin Parekh, partner and national leader (financial services) Ernst & Young. Expressing similar views, Diljeet Titus, senior partner of law firm Titus & Co, said, "the relaxation of investment norms will encourage overseas acquisitions. It will be of great help to infrastructure companies which are looking for mining rights". The RBI's decision, according to Naresh Makhijani, executive director KPMG, "will substantially increase the operational flexibility of the Indian corporates for their overseas projects". Since the onset of the economic liberalisation, several Indian companies have acquired overseas companies and invested in new projects. Under the modified norms, only 50 per cent of the amount of performance guarantee provided by Indian companies to overseas ventures will be taken into account while computing the overall exposure limit. Indian companies are allowed financial commitments in overseas ventures upto 400 per cent of their net worth. Under the old norms, 100 per cent of the performance guarantee is taken into account while calculating the overall exposure limit of an Indian company. The Indian companies, RBI said, will also be permitted to increase their overseas exposure to beyond 400 per cent limit with the prior approval of the central bank. The modified norms will allow Indian companies greater headroom for overseas investments. In order to provide more operational flexibility to the Indian corporates, RBI has decided to allow them to write-off capital and other receivables like loans, royalty, technical know-how fees and management fees in respect to those joint ventures and wholly owned subsidiaries (WOS) in which they have more than 51 per cent stake |
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