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RBI seal on rupee float measures

Mumbai, Jan. 14: The Reserve Bank of India today put its stamp of approval on Union finance minister Jaswant Singh’s path-breaking announcements made on January 10 at the NRI convention. The central bank declared a slew of relaxations for Indians and companies that included allowing domestic companies and mutual funds to invest in the equity of overseas listed companies and allowing companies to retain the external commercial borrowings (ECBs) abroad.

However, the relaxations come with riders. Listed Indian companies are permitted to invest abroad in companies listed on a recognised stock exchange and which holds at least 10 per cent in an Indian company listed on a recognised stock exchange in India (as on January 1 of the year of the investment). Such investments shall not exceed 25 per cent of the Indian company’s net worth as on the date of latest audited balance sheet, the RBI clarified. This is subject to the condition that all transactions are routed through a designated authorised dealer and rupee payments received from the investor’s bank account. Before allowing the remittances, the authorised dealer shall ensure that the investments are made strictly in accordance with the conditions laid out.

While companies raising ECBs have been allowed to retain the funds abroad in a bank account for their future forex requirements, RBI said this will be allowed only if the debits in the account are approved for purposes for which the loan has been raised. Payment to the overseas supplier, if any, shall be made against the usual import documents.

The deposit held abroad should not be utilised for any fund-based or non-fund-based facilities in India and the account should be closed once the forex requirements are met and any unspent balance should be repatriated to India immediately.

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