RBI eases forex rules, doubles overseas investment limit to $200,000
25 Sep 2007
Mumbai: The Reserve Bank of India (RBI) has doubled the overseas remittance limit for resident individuals to $200,000 from $100,000. It has also liberalised overseas investment norms of Indian companies.
Under the liberalised foreign exchange rules, Indian companies can invest up to 400 per cent of net worth in overseas joint ventures against the earlier limit of 200 per cent of net worth.
RBI raised mutual funds'' overseas investment to $5 billion from $4 billion while it raised the ECB repayment limit to $500 million from $400 million.
Mutual funds taking money overseas can now invest up to $5 billion against the earlier limit of $4 billion. Mutual funds, however, have actually taken abroad only $500-600 million so far.
While
the RBI has increased the repayment limit of external commercial borrowings (ECB)
from $400 million to $500 million, it also allowed Indian listed companies to
make portfolio investments of up to 50 per cent of their net worth in foreign
companies against the earlier limit of 35 per cent of net worth.
Also,
the RBI has completely done away with the 10 per cent reciprocal share holding
norm.
The RBI move comes even as overseas investments pouring into the country right now, and what is concerning the RBI is that it is leading to a liquidity problem at the moment.
FIIs
had invested $314 million in equity on Monday alone, taking FII investment in
the cash market to $1.5 billion in last four trading days alone.
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