RBI/2005/463
A.P.(DIR Series) Circular No. 42
May 12, 2005
To
All Banks Authorised to Deal in Foreign Exchange
Madam/Sirs,
Overseas Investment: Liberalisation
Attention of authorised dealer (AD) banks
is invited to Regulation 6 of the Notification
No.FEMA.120/RB-2004 dated July 7, 2004 in terms of which an Indian entity
is permitted to invest upto 100 per cent of their net worth in overseas Joint
Ventures and/or Wholly Owned Subsidiaries (JV/WOS) in any bonafide business
activity under automatic route.
2. With a view to promoting Indian investment
abroad and to enable Indian companies to reap the benefits of globalisation,
it has been decided to raise the above ceiling from the present 100 per cent
of the net worth to 200 per cent of the net worth of the investing company.
Accordingly, under the automatic route for overseas investment, eligible Indian
entities are now permitted to invest in overseas in JV/WOS upto 200 per cent
of their net worth. All other provisions of the Notification mentioned above
applicable to such investment shall remain unchanged. It is further clarified
that the ceiling is not applicable to the investments made out of balances held
in EEFC accounts and out of the proceeds of ADR / GDR issue, as hitherto.
3. AD banks may, accordingly, allow remittances
under automatic route upto 200 per cent of the net worth as on the date of the
last audited balance sheet of the investing companies, after considering the
proposals received in form ODA.
4. Necessary amendments to the Foreign Exchange
Management (Transfer or Issue of any foreign security) Regulations, 2004 are
being issued separately.
5. AD banks may bring the contents of this
Circular to the notice of their constituents and customers concerned.
6. The directions contained in this circular
have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management
Act, 1999 (42 of 1999), and is without prejudice to permission / approvals,
if any, required under any other law.
Yours faithfully,
(Vinay Baijal )
General Manager-in-Charge
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