Presently, an Indian company is permitted to undertake direct investment in all its Joint Ventures (JV) and/ or Wholly Owned Subsidiaries (WOS) abroad engaged in bona fide business activities, provided that the total financial commitment / overseas investment of the Indian company in such JV or WOS does not exceed 300% of its net worth, by virtue of the provisions of the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 ("Regulations").
In order to provide flexibility to the foreign investment transactions of Indian companies, the Reserve Bank of India has vide its Circular dated 26th September 2007 notified amendments to the Regulations.
As per the new norms, the ceiling on investment of Indian corporates in their overseas JVs and WOSs has been raised to 400 per cent of their net worth as against the earlier limit of 300 per cent, as on the date of the last audited balance sheet of the Indian company. Such investment would be permitted under the automatic route.
The enhanced investment limits would henceforth also be extended to overseas investments by registered partnership firms.
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