Mumbai, March 2 (PTI): Following the budgetary announcements on relaxation of capital account transactions, the Reserve Bank of India (RBI) has permitted Indian companies to invest up to $ 100 million in overseas ventures through the automatic route in diversified sectors.
Companies would also be allowed to prepay external commercial borrowings (ECBs) of over $ 100 million under the automatic route, RBI said in a release here today.
Earlier, they could prepay ECBs only up to $ 100 million without RBI approval and this relaxation in ceiling would be available until further notice, subject to review, it said.
Companies were so far permitted to invest in overseas joint venture or wholly-owned subsidiary engaged in the same core activity, which contributed at least 50 per cent of its average turnover, under the automatic route.
The Reserve Bank said that companies would be allowed to make overseas investment up to 100 per cent of net-worth against the previous ceiling of 50 per cent.
Presenting the Union Budget for 2003-04 on Friday, finance minister Jaswant Singh had said, “The current restriction limiting such investment to 50 per cent of the net worth of the company will now be raised to 100 per cent.”
The move is a part of the ongoing effort of the government to ease capital account mobility.
The other sops declared for the corporate sector in the Union budget include, continuation of the tax holiday under Sections 10A and 10B; and the restrictive provisions which took away the tax holiday after a demerger or amalgamation have now been deleted.