RBI eases norms for Indian companies investing abroad on high forex reserves

The Reserve Bank of India, encouraged by comfortable forex reserves, on Monday relaxed the norms for domestic companies investing abroad by doing away with the ceiling for raising funds through pledge of shares, domestic and overseas assets.

"It has been decided that banks may permit creation of charge pledge on the shares of the JV/WOS... (irrespective of the level) of an Indian party in favour of a domestic or overseas lender for securing the funded or non-funded facility... Under the automatic route," an RBI notification said while modifying the Overseas Direct Investments norms.

Earlier, the fund raising for the purpose of overseas investment by home-grown companies were subject to various limitations.

In addition to joint ventures (JVs) and Wholly Owned Subsidiaries (WOSs), the central bank has announced similar concessions for pledging of shares in case of step down subsidiary.

"The matter relating to the setting up or acquiring the multi-layered structure of overseas entities by the Indian party, wherever applicable, is under the examination of the Reserve Bank and the decision taken in this regard will be conveyed in due course for necessary compliance at Indian party level," RBI said.

The country's foreign exchange reserves in the week to December 19 surged by a whopping US $3.163 billion to US $319.997 billion on the back of a massive jump in foreign currency assets.

Last week, forex reserves had jumped by US $2.172 billion to US $316.833 billion, data released by the central bank showed.

In the week to July 25, 2014, the reserves had touched US $320.56 billion, an inch away from the life-time high of US $320.79 billion recorded on September 2, 2011.