Reserve Bank of India Tightens Scrutiny of Large Overseas Investments

The Reserve Bank of India is tightening scrutiny of large overseas investments by domestic companies to curb capital outflows and stabilize the rupee, which has declined more than 5% this year. The central bank issued a standardized checklist to major banks requiring detailed information on overseas direct investments exceeding $1 billion and transactions that surpass four times an investing company’s net worth.

Under these new guidelines, banks must independently assess overseas asset valuations, including acquisition premiums and share-swap ratios, rather than relying solely on provided valuation reports. Banks are also required to evaluate the financial resilience and earnings quality of the investing company.

This regulatory shift complements existing efforts by the central bank to defend the national currency. These measures include curbing dollar purchases by importers and tightening rules regarding corporate currency hedging.