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RBI eases forex rules further

MUMBAI: The Reserve Bank of India (RBI) on Tuesday announced a slew of measures with regard to the foreign exchange outflows to implement the third phase of the recommendations of the Committee on Fuller Capital Account Convertibility (CFCAC).

The measures include the enhancement of the existing limit under the liberalised remittance scheme (LRS) from $100,000 to $200,000 per financial year.

“On a review of the current macro economic situation and in consultation with the Union Government, it has been decided to accelerate the implementation of the third phase of the recommendations of the Committee on Fuller Capital Account Convertibility (CFCAC) with regard to the foreign exchange outflows,” the RBI stated in a press release. Accordingly, these measures are being implemented with immediate effect, the RBI added.

Investment in overseas joint ventures and wholly owned subsidiaries by Indian companies will now be permitted up to 400 per cent of the net worth of the Indian company under the automatic route.

The enhanced limit will be available to registered partnership firms.

In order to provide greater opportunities to listed Indian companies for portfolio investment abroad, the RBI stated, the existing limit of 35 per cent of the net worth for portfolio investments by listed companies is being increased to 50 per cent of the net worth.

Further, the requirement of 10 per cent reciprocal share holding in the listed Indian companies by overseas companies for the purpose of portfolio investment outside India by Indian listed companies has been dispensed with.

The existing limit for prepayment of external commercial borrowings (ECBs) without RBI approval is being increased from $400 million to $500 million, subject to compliance with the minimum average maturity period as applicable to the loan.

The RBI also increased the aggregate ceiling for overseas investments by mutual funds, registered with the Securities and Exchange Board of India, from $4 billion to $5 billion. In addition, the RBI stated, “the existing facility of investing up to $1 billion in overseas exchange traded funds, as may be permitted by SEBI by a limited number of qualified Indian mutual funds would continue.”

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