Reserve Bank of India (RBI) Issues Detailed Checklist for Banks to Scrutinise Large Overseas Direct Investments Above $1 Billion

Key facts

• The Reserve Bank of India (RBI) has issued banks a detailed and standardised checklist for scrutinising large-value overseas direct investments (ODIs) by Indian companies amid pressure on the rupee.
• The stricter scrutiny applies to all ODIs above $1 billion and beyond the regulatory cap of four times the net worth of the domestic investing company.
• ODI outflows crossed $30 billion in FY26, up from about $11 billion five years ago.
• Banks must not rely merely on the availability of a valuation report and must examine whether the premium paid is significantly above intrinsic value and whether swap exchange ratios are independently defensible.
• Banks must assess the investing company's quality of earnings, previous ODI experience, existing overseas commitments, ability to absorb adverse events, and the bona fide nature of the foreign entity and country risk.
• Banks must submit amounts and timelines of potential benefits to India, such as incremental exports, import substitution, access to new markets, technology-IP transfer, and inflows of dividends and fees.
• Where an Indian parent offers a guarantee to lower the overseas entity's borrowing cost, banks must assess the likelihood of invocation of such guarantees.