RBI tightens scrutiny of $1 billion-plus overseas investments
Benchmarks Nifty22,888.95-257.21FEATURED FUNDS★★★★★UTI Aggressive Hybrid Fund Regular Plan-Growth5Y Return8.8 % Invest NowFEATURED FUNDS★★★★★Motilal Oswal Midcap Fund Direct-Growth5Y Return18.64 % Invest NowEnter search…
RBI tightens scrutiny of $1 billion-plus overseas investments amid rupee pressure
RBI tightens scrutiny of $1 billion-plus overseas investments amid rupee pressure
By Sugata Ghosh, ET BureauLast Updated: Oct 20, 2026, 12:56:00 AM ISTSynopsisThe Reserve Bank of India is implementing stricter scrutiny on large overseas direct investments by Indian companies. Banks must now collect and present detailed information regarding these investments to the RBI. This initiative aims to prevent potential losses for both the companies and the Indian economy. The RBI's checklist requires banks to conduct thorough due diligence on the rationale behind each investment.
Mumbai: The Reserve Bank of India (RBI) is mounting scrutiny on large-value overseas direct investments (ODIs) by India Inc, amid battle to defend the rupee.Last week, the banking regulator gave leading banks a detailed and standardised checklist, spelling out a slew of ODI information that banks have to collect from corporate clients investing abroad and submit to it. This pertains to all ODIs above $1 billion and beyond the regulatory cap of four times the net worth of the domestic company investing abroad, two persons aware of the development told ET.
Also Read: $60 billion in 6 weeks: RBI's rupee defence comes at a cost
While no controls or curbs have been imposed by the central bank, the rationale, justification, financials, and explanations sought from the banks handling remittances indicate a closer vigil on large ODI outflows at a time India is grappling with pressure on the currency and FPI selloffs.
ODIs, which have significantly contributed to outflows in recent times, crossed $30 billion in FY26 from about $11 billion five years ago.
Live Events
RBI has categorically laid down that banks while facilitating ODI transactions shall not simply rely on the availability of a valuation report on the overseas entity but also satisfy themselves on the basis of the report. The appraisal, the regulator said, should specifically examine the premium paid and whether the consideration is significantly above intrinsic value, and, in case of a swap, the exchange ratio is independently defensible on the valuation of both entities.
Keeping a close watch "It is clearly a preventive measure by RBI so that in future large value ODIs do not become impaired investment resulting in loss for Indian entities as well as for the country," said Suhas Bendre, founder of Bendre Consultancy, which specialises on the Foreign Exchange Management Act (FEMA).
Besides doing a customary analysis of the investing company's financials and proposed ODI, banks have to assess the company's quality of earnings, previous ODI experience, existing overseas commitments, and ability to absorb adverse events. Banks have to question corporate clients why a foreign entity is preferred over an Indian acquisition, how is the transaction related to the Indian company's existing business, whether the foreign entity is an operating or holding vehicle, expected commercial return and holding period, and the proposed exit route.
"All this places a stronger evidentiary burden on applicants and greater responsibility on banks to independently assess the rationale and risks underlying these commitments. We are seeing a shift towards closer scrutiny of commercial viability of investments, their benefits to India, and financial resilience of Indian investors through stress testing and other methods," said Moin Ladha, partner at Khaitan & Co.
Banks have to assess the bona fide nature of the foreign entity and country risk. "The detailed checklist shared with banks is closer to an ODI due diligence exercise. While the existing Master Direction on Overseas Investments outlines indicative approval criteria, including foreign entity's viability, benefits to India, and the Indian entity's track record, the checklist fleshes out all information required in great detail which may have been missed out in the past. Given a volatile rupee, this would help facilitate approvals for only those cases where banks are convinced about the genuineness of proposed transactions," said Harshal Bhuta, cofounder at Ascentium India, a tax and regulatory consultancy.
Also Read: RBI announces $10.5 billion liquidity infusion via repo
For instance, where a related-party element exists or the transaction is capable of resulting in a transfer of value outside India, a heightened standard of scrutiny will be done by banks.
In estimating how a large ODI would help the Indian economy, banks have to submit the amounts and timeline of potential benefits like incremental exports from India, import substitution, access to new markets and technology-IP transfer to India, and inflow of dividend and fees. In cases when the Indian parent offers guarantee to lower borrowing cost of the overseas entity, banks have to assess the likelihood of invocation of such guarantees.
Add as a Reliable and Trusted News Source Add Now!
(You can now subscribe to our ETMarkets WhatsApp channel)
Read More News onRBI overseas investments scrutinyrupee pressure RBI measuresIndian companies investing abroadcurrency protection measures RBIODI checklist by RBIbanks and ODI transactionsimpact of ODIs on Indian economyForeign Direct Investments in India
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless(You can now subscribe to our ETMarkets WhatsApp channel)
Read More News onRBI overseas investments scrutinyrupee pressure RBI measuresIndian companies investing abroadcurrency protection measures RBIODI checklist by RBIbanks and ODI transactionsimpact of ODIs on Indian economyForeign Direct Investments in India
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...morelessPrime ExclusivesInvestment IdeasStock Report PlusePaperWealth EditionOne company, 2 words. Bond yield and CDS: Will they decide the fate of global markets?
Business of Odd Things: Inside an industry that farms fish that nobody is meant to eat
War's second-order effects are becoming visible in critical sectors
US mid-term elections – Part 2: What does it mean for Trump to lose control of Congress?
Homebuyers wait as NCLT panel picks holes in unfinished Jaypee projects
What is the real impact of 13x jump in cash transfers to women?
- 1
- 2
- 3
& personalised newslettersLogin NowUnlimited AccessStarting @ Rs120/monthGet access to exclusive stories, expert opinions &
in-depth stock reportsSubscribe NowET
Unlock Access to All Exclusives with ETPrime FREE TRIAL
15 Days Free: Unlock All ETPrime Exclusives, Market Tools & ePapers
Trial offer expiring in00 : 05 : 00
I'd rather pay ₹2599 nowUh-oh! This is an exclusive story available for selected readers only.
Worry not. You’re just a step away.
Prime Account Detected!
It seems like you're already an ETPrime member with
Login using your ET Prime credentials to enjoy all member benefits
Log out of your current logged-in account and log in again using your ET Prime credentials to enjoy all member benefits.
Unlock ETPrime's Exclusive Stories Today!
Big Price Drop! Flat 40% Off
Student Only OfferAlready a Member? Sign In nowAlready a Member? Sign In nowAlready a Member? Sign In nowOffer Exclusively For You
Save up to Rs. 700/-
ON ET PRIME MEMBERSHIP
Avail OfferOffer Exclusively For You
Get 1 Year Free
With 1 and 2-Year ET prime membership
Avail OfferOffer Exclusively For You
Get 1 Year Free
With 1 and 2-Year ET prime membership
Avail OfferOffer Exclusively For You
Get Flat 40% Off
Then ₹ 1749 for 1 year
Avail OfferOffer Exclusively For You
ET Prime at ₹ 49 for 1 month
Then ₹ 1749 for 1 year
Avail OfferSpecial Offer
Get flat 40% off on ETPrime
Avail OfferAvail OfferClaim NowAlready a Member? Sign In nowNeed Assistance?
Connect with an ETPrime expert for personalized support and guidance
+91 9484700004'; }); } if(listing) { var h3 = "You tried reading " + listArr.length + " locked stories in the past " + threshold + " days.", h4 = "Become an ET Prime member and don't miss out on these exclusive stories."; var html = '' + h3 + '
' + h4 + '
- ' + listing + '
What’s Included with
ETPrime Membership
1Exclusive Insights That Matter
Uncover the truth with our investigative stories
Make strategic moves using the real-world case studies
Read industry-specific stories to identify emerging trends
Spot opportunities with in-depth insights that matter
Trump temper on H-1B visas is forcing Indians to do these things to stay put in US
What Adani’s US indictment means for India Inc’s overseas fundraising
Why veterans like Reliance, L&T are on acquisition spree? Aswath Damodaran has an answer.
Will China’s dollar bond sale in Saudi Arabia trump the US in financial world?
Huawei launches its own OS to compete with Google and Apple. But can it win beyond China?
The problem with lab grown diamonds
Why a falling rupee is a better option for the economy
A list of top 20 momentum stocks that have delivered massive returns in one year
2Invest Wisely With Smart Market Tools & Investment Ideas
Alpha Trade
Get daily trade ideas from SEBI-registered research analysts.
Investment Ideas
Grow your wealth with stock ideas & sectoral trends.
Stock Reports Plus
All-in-one stock research with Stock Score, peer comparison & key signals.
BigBull Portfolio
Get to know where the market bulls are investing to identify the right stocks.
Stock Analyzer
Check the score based on the company's fundamentals, solvency, growth, risk & ownership to decide the right stocks.
Market Mood
Analyze the market sentiments & identify the trend reversal for strategic decisions.
Stock Talk Live at 9 AM Daily
Ask your stock queries & get assured replies by ET appointed, SEBI registered experts.
3Stay informed anytime, anywhere with ET ePaper
ePaper - Print View
Read the PDF version of ET newspaper. Download & access it offline anytime.
ePaper - Digital View
Read your daily newspaper in Digital View & get it delivered to your inbox everyday.
Wealth Edition
Manage your money efficiently with this weekly money management guide.
TOI ePaper
Read the PDF version of TOI newspaper. Download & access it offline anytime.
Deep Explainers
Explore the In-depth explanation of complex topics for everyday life decisions.
Health+ Stories
Get fitter with daily health insights committed to your well-being.
Personal Finance+ Stories
Manage your wealth better with in-depth insights & updates on finance.
5Enjoy Complimentary Subscriptions From Top Brands
Stream new documentaries from all across the world every day.
Stories you might be interested in
Figures reflect the source report and its stated period. This article is for information and is not investment advice.
