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Last week, the banking regulator gave leading banks a detailed and standardised checklist, spelling out a slew of ODI information that banks have to collect from corporate clients investing abroad and submit to it. This pertains to all ODIs above $1 billion and beyond the regulatory cap of four times the net worth of the domestic company investing abroad, two persons aware of the development told ET. Also Read: $60 billion in 6 weeks: RBI's rupee defence comes at a cost While no controls or curbs have been imposed by the central bank, the rationale, justification, financials, and explanations sought from the banks handling remittances indicate a closer vigil on large ODI outflows at a time India is grappling with pressure on the currency and FPI selloffs. ODIs, which have significantly contributed to outflows in recent times, crossed $30 billion in FY26 from about $11 billion five years ago. RBI has categorically laid down that banks while facilitating ODI transactions shall not simply rely on the availability of a valuation report on the overseas entity but also satisfy themselves on the basis of the report. The appraisal, the regulator said, should specifically examine the premium paid and whether the consideration is significantly above intrinsic value, and, in case of a swap, the exchange ratio is independently defensible on the valuation of both entities. Besides doing a customary analysis of the investing company's financials and proposed ODI, banks have to assess the company's quality of earnings, previous ODI experience, existing overseas commitments, and ability to absorb adverse events. Banks have to question corporate clients why a foreign entity is preferred over an Indian acquisition, how is the transaction related to the Indian company's existing business, whether the foreign entity is an operating or holding vehicle, expected commercial return and holding period, and the proposed exit route. "All this places a stronger evidentiary burden on applicants and greater responsibility on banks to independently assess the rationale and risks underlying these commitments. We are seeing a shift towards closer scrutiny of commercial viability of investments, their benefits to India, and financial resilience of Indian investors through stress testing and other methods," said Moin Ladha, partner at Khaitan & Co. Banks have to assess the bona fide nature of the foreign entity and country risk. "The detailed checklist shared with banks is closer to an ODI due diligence exercise. While the existing Master Direction on Overseas Investments outlines indicative approval criteria, including foreign entity's viability, benefits to India, and the Indian entity's track record, the checklist fleshes out all information required in great detail which may have been missed out in the past. Given a volatile rupee, this would help facilitate approvals for only those cases where banks are convinced about the genuineness of proposed transactions," said Harshal Bhuta, cofounder at Ascentium India, a tax and regulatory consultancy. Also Read: RBI announces $10.5 billion liquidity infusion via repo For instance, where a related-party element exists or the transaction is capable of resulting in a transfer of value outside India, a heightened standard of scrutiny will be done by banks. In estimating how a large ODI would help the Indian economy, banks have to submit the amounts and timeline of potential benefits like incremental exports from India, import substitution, access to new markets and technology-IP transfer to India, and inflow of dividend and fees. In cases when the Indian parent offers guarantee to lower borrowing cost of the overseas entity, banks have to assess the likelihood of invocation of such guarantees. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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