RBI has reduced the limits for Overseas Direct Investments (ODIs). Hitherto Indian companies were allowed to invest upto 400% of its net worth as ODIs on automatic route. The networth was to be calculated as per its last audited balance sheet. Now the limits have been reduced to 100% of its net worth as per its last audited balance sheet on automatic basis. Any investments above the 100% of net worth will be on approval basis. Therefore there is not a complete ban on overseas investments.
This reduction in limit from 400% to 100% is also applicable to ODIs in unincorporated entities in the energy and natural gas sectors.
However this reduction in limits is not applicable to overseas investments by navratna public sector undertakings like ONGC Videsh, OIL India in both unincorporated as well incorporated entities on automatic route without any limits whatsoever.
These provisions will apply with immediate effect to all overseas direct investments on a prospective basis which means that existing overseas direct investments will not be hit by the reduction in limits.