Overseas Investments by Indians
Overseas Investments by Indians
Norms Liberalised Further on June 20, 1997The Government on June 20 liberalised norms for Indian investments overseas through two fast track windows, over and above the existing one. The two windows include investments from balances in Exchange Earners Foreign Currency (EEFC) Accounts and investments out of Global Depository Receipts (GDRs), according to a press statement by the Department of Economic Affairs, Ministry of Finance (MoF). Accordingly, Indian corporates raising GDRs would be permitted to invest, in ventures overseas, a maximum of 50 per cent of GDRs to be raised, under the normal GDR approval process of MoF with overseas investment as a permitted end-use. Separate clearance from the overseas investment angle would not be necessary in such cases nor would such investments be subject to the obligation of neutralising the investment amount through inward remittances over five years.
In this connection it may be noted that under the existing fast track window, the RBI issues approvals within 21 days for proposal of overseas investments up to $4 millions on the basis of export track record (up to 25 per cent of average annual export earnings over the past three years are eligible for fast track treatment under this window).
The second fast track is that as per the Finance Minister's announcement in the 1997-98 Budget speech, investments in overseas joint ventures and wholly-owned subsidiaries, to a maximum of $ l 5 millions, to be funded out of EEFC balances, would be permitted by authorised dealers (ADs) without reference to the RBI.
Such investments would be permitted without reference to the norms and guidelines in the existing policy on investments overseas.
The ceiling of $15 millions is inclusive of the ceiling of $4 millions under the existing fast track and would be applied in respect of overseas investments by a corporate over a bloc of three financial years. It is further contended that all cases not covered under the three fast track windows would be considered by the special inter-Ministerial Committee, located in RBI, under the Chairmanship of the Commerce Secretary.
The norms and parameters already notified by the Government would continue to be applicable for such cases with the ensuing modifications;
(i) investment proposals with a sizeable GDR and or/EEFC component would have priority;
(ii) in respect of investment proposals in excess of $15 millions, the additional amount could be funded through EEFC balances, in addition to GDR funds. Exemption from the requirement of GDR/EEFC funding for such investments would be considered in cases where the companies have a strong track record in exports, or where there are other compelling benefits in the investment proposal.
Alongside, it has been decided to enhance the empowered mandate of the inter-Ministerial Special Committee to cover investment proposals up to $15 millions, against the present ceiling up to $10 millions only.
It may be added that here that hitherto all proposals of Indian investment overseas require a separate clearance of the Central Government under Sections 370 and 372 of the Companies Act, 1956. It has now been decided that such clearance would be considered during the Special Committee's consideration of the investment proposal, and the approval granted by the Special Committee would include the approval under Section 370 and 372 of the Companies Act as well.
Thus Finance Ministry will now, at one go clear the GDR application of a company as well as the proposal to invest upto 50 per cent of the GDR funds in a joint venture or in a wholly owned subsidiary abroad. Thus the overseas investment proposal will not have to seek clearance from the other cells - a special RBI committee and the Department of Company Affairs as was the practice hitherto.