RBI Steps Up Scrutiny of Overseas Direct Investments by Indian Companies

Indian companies investing overseas will have to provide a much broader set of disclosures under the Reserve Bank of India's latest review of Overseas Direct Investments (ODIs), as per The Economic Times report.  

Through authorised dealer banks, the central bank has sought fresh information on foreign subsidiaries, joint ventures and business partners, expanding the scope of data collected under the existing reporting framework. 

The revised questionnaire, sent to several private and multinational banks in late June, covers operational, financial and compliance-related information that was not routinely sought earlier. 

Partner Checks Added to Reporting 

A major addition is the requirement to disclose the due diligence carried out on overseas partners before an investment is made.  

Companies have been asked to explain the anti-money laundering (AML) checks undertaken on foreign businesses and co-investors, along with the process followed to verify their credentials. 

The reporting format also asks whether overseas entities have physical offices, employ their own staff and operate independently. Details of ownership structure and business activities have also been sought. 

Financial Information Expanded 

The RBI has requested financial data for every overseas entity from FY22 onwards. This includes revenue, expenditure, employee costs, headcount, energy consumption, research and development spending, and key financial ratios. 

Companies have also been asked to disclose exports and imports with overseas entities, dividend receipts, loan interest payments, dealings with step-down subsidiaries and instances where capital invested in foreign ventures has been written off. 

Outbound Investments Have Grown 

India's ODI outflows have increased from about $11 billion five years ago to nearly $34 billion in FY26.  

As overseas investments have expanded, the information sought by the RBI has also become more detailed, covering both financial performance and day-to-day operations of foreign businesses. 

Some of the information requested, particularly expenditure and transaction details of overseas entities, may have to be obtained from multiple jurisdictions. 

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Conclusion 

The revised questionnaire adds operational, financial and compliance-related disclosures to the existing reporting framework. The information will be used by the RBI to monitor overseas investments made by Indian companies. 

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