What changed
RBI consolidated and restated existing guidelines on transfer of shares in overseas joint ventures (JVs) and wholly owned subsidiaries (WOSs). It clarified conditions for sale without write-off and introduced specific thresholds for disinvestment involving write-off without prior RBI approval. The circular also reiterated reporting requirements and the need for prior RBI approval for cases not meeting the conditions.
What it means for you
Banks and lenders can now process overseas disinvestment transactions more efficiently, as Indian parties meeting specified criteria (e.g., listed entities, net worth over Rs.100 crore, or investment under USD 10 million) can proceed without seeking RBI approval. This reduces compliance burden and speeds up capital repatriation. However, banks must ensure strict adherence to conditions like fair value certification and reporting within 30 days to avoid regulatory issues.
What you must do
- Update internal procedures to process disinvestment requests under the new consolidated guidelines without requiring prior RBI approval for eligible cases.
- Verify that Indian parties meet all conditions (e.g., no outstanding dues, one-year operation, fair value certification) before processing share transfers.
- Ensure reporting of disinvestment details to RBI within 30 days through the designated AD Category-I bank.
- Advise customers on the need for prior RBI approval if they do not satisfy the specified conditions.
Who it affects
All Category-I Authorised Dealer banks, Indian parties with overseas JVs or WOSs, Compliance and forex departments of banks
Can an Indian party disinvest from an overseas JV/WOS without RBI approval if the sale involves a write-off?
Yes, but only if the JV/WOS is listed on an overseas stock exchange, or the Indian party is listed in India with net worth of at least Rs.100 crore, or the investment does not exceed USD 10 million (for unlisted or smaller listed companies).
What documentation is required for a private sale of unlisted overseas shares?
The sale price must not be less than the fair value certified by a Chartered Accountant or Certified Public Accountant based on the latest audited financial statements of the JV/WOS.
What is the deadline for reporting a disinvestment to the RBI?
The Indian party must submit details of the disinvestment through its designated AD Category-I bank within 30 days from the date of disinvestment.