The RBI today increased the limit on portfolio investment by listed Indian companies in foreign listed companies from 25 to 35 per cent of their net worth. It also enhanced the limit for overseas investment in joint ventures or wholly owned subsidiaries by Indian companies from 200 per cent to 300 per cent of their net worth. This will help the Indian companies planning big overseas acquisitions.

“With each passing year, the government is moving towards capital account convertibility and this is a step to enhance Indian companies’ overseas investments,” said S C Gupta, chairman and managing director of PNB.

One of the impacts of economic liberalisation is that Indian companies are aspiring to become global players. They are looking for overseas acquisitions. Tata acquiring Corus, Aditya Birla group buying Novelis are some of the recent examples of Indian companies buying global majors. RBI’s move will help Indian companies in fulfilling their global dreams.

The inflows have been growing significantly due to the rising interest rates. This leads to currency appreciation. “The new credit policy will not only check this but also address the demands of Indian companies for their foreign acquisitions,” said Abheek Barua, chief economist, ABN AMRO Bank.

“The RBI has been trying to liberalise the overseas investment in a disciplined manner. The new policy will make Indian players more influential in international markets,” said Rajan Krishnan, business head of Principal PNB AMC.

Welcoming RBI’s monetary policy, said Habil Khorakiwala, president, Ficci: “This is in line with the recommendations of the Tarapore Committee on capital account convertibility and Percy Committee on IFC and clearly shows RBI’s willingness to move towards the CAC in a calibrated manner.”

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