RBI tightens review of billion-dollar overseas investments as rupee weakens

In an effort to stem capital outflows and support the weakening rupee, the Reserve Bank of India issued a standardized questionnaire to leading banks, demanding comprehensive details on overseas direct investments above $1 billion and transactions surpassing four times a firm’s net worth. The RBI’s guidance instructs banks to conduct their own assessments of foreign asset valuations, including acquisition premiums and share-swap ratios, and to evaluate the investing company’s earnings stability, prior overseas deals, and resilience to financial shocks.

This initiative adds to recent regulatory tightening on corporate currency hedging and restrictions on importers’ dollar buying, which have been introduced as the rupee fell over 5% this year. While the central bank has not imposed new caps on such investments, the enhanced scrutiny signals a broader strategy to protect the domestic currency. The checklist was reported, citing two sources familiar with the matter, and the RBI did not comment to Bloomberg.