RBI relaxes overseas investment curbs

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The Reserve Bank of India (RBI) on Wednesday relaxed some of the overseas investment curbs imposed earlier to stem rupee's slide. RBI said companies raising funds through ECB route can invest up to 400 per cent of their net worth in foreign countries without seeking prior approval of the central bank.

This limit was reduced to 100 per cent last month in a bid to protect a depreciating rupee against the dollar.

"It has been decided further to retain the limit of 400 per cent of the net worth of the Indian Party for the financial commitments funded by way of eligible External Commercial Borrowing (ECB) raised by the Indian Party as per the extant ECB guidelines issued by the Reserve Bank of India from time to time," said RBI in a statement.

RBI has also allowed Indian companies to tap ECB route for general corporate purposes, subject to certain conditions. Earlier, borrowers were not allowed to raise funds through ECBs for general corporate purposes.

"On a review, it has been decided to permit eligible borrowers to avail of ECB under the approval route from their foreign equity holder company with minimum average maturity of 7 years for general corporate purposes subject to the following conditions," said RBI in a statement.

However, the central bank also said such ECBs would not be used for any purpose not permitted under extant the ECB guidelines. RBI also said "Minimum paid-up equity of 25 per cent should be held directly by the lender." Also repayment of the principal would commence only after completion of minimum average maturity of 7 years and no prepayment will be allowed before maturity.

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Story first published: Wednesday, September 4, 2013, 21:50 [IST]
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