RBI And SEBI Tighten Scrutiny On Overseas Investments Amid Rupee Pressure

India's central bank and markets regulator have stepped up oversight of overseas investments by companies and family offices, sending at least ten queries in the past three weeks to examine whether funds are being routed abroad without clear business justification, according to three sources with direct knowledge of the matter.

The move comes as the rupee faces sustained pressure from elevated crude oil prices and foreign portfolio investor outflows. The government has already raised import taxes on precious metals to address the same problem. The latest regulatory action targets the capital account side.

What Is Being Examined

The Reserve Bank of India's (RBI) queries focus on whether money leaving through the overseas direct investment route has genuine commercial purpose and tangible asset backing. Regulators are specifically looking at:

• Large overseas investments channelled through opaque or layered structures.

• Inflated valuations of offshore assets used to justify higher remittances.

• Family offices using corporate overseas direct investment structures to access higher outflow limits than individual caps allow.

• Corporate entities that set up overseas arms primarily for capital market exposure rather than genuine international expansion.

The Securities and Exchange Board of India (SEBI) has separately slowed no-objection letters for regulated firms seeking overseas structures and is flagging proposals where asset valuations appear aggressive. Regulators are also examining whether SEBI-registered merchant bankers are assigning inflated figures to justify remittances.

The Numbers

Overseas direct investment rose 11% year-on-year to $48.39 billion in FY26, according to Reserve Bank of India data.

Individual remittances under the Liberalised Remittance Scheme (LRS) reached $28.9 billion over the same period.

Together, those outflows represent a drag on reserves at a time when the oil import bill is already stretching the current account.

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Not A Crackdown

According to reports, sources were careful to frame the activity as calibration rather than restriction. The scrutiny is about understanding why capital is leaving and whether it is adding to currency pressure, not about blocking legitimate cross-border business.

Legal advisers said regulators are focused on ensuring commercial rationale and fund deployment remain robust throughout the life of an overseas investment, rather than unwinding India's outward investment framework.

Sources:

Reuters

MSN