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May 18, 2026
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RBI tightens scrutiny of overseas investments as outflows surge to $27 billion in FY26
Amid austerity calls to conserve hard currency, regulatory authorities are scrutinising whether India Inc's overseas direct investments (ODI) have gone into "bona fide businesses."
The RBI's foreign exchange department is asking companies to explain the intent and rationale behind investments, the governance structure of overseas entities, and future plans, according to a person aware of the development.
The sharp rise in ODI outflows has raised questions over the use of funds.
Total annual ODI outflows - comprising equity, loans and invoked guarantees - rose from $14.5 billion in FY24 to $27 billion in FY26. Singapore, the US and the UAE are among the top ODI destinations.
"Corporates must realise ODIs are for genuine business and not merely a structuring exercise. The recent RBI queries suggest that the regulator is examining the commercial substance of investments, fund end-use, governance, performance and repatriation plans," said Moin Ladha, partner at law firm Khaitan & Co.
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