RBI changes norms for credit facilities to overseas branches of Indian companies
Updated: Jan 01, 2016 12:28:07pm
The RBI has revised its 2007 instructions allowing banks in India to extend funded and/or non-funded credit facilities to step-down subsidiaries of the overseas arms of Indian companies and come out with modified norms.
The Modified norms said "Banks may extend funded and/or non-funded credit facilities to the step-down subsidiaries of Indian companies including to those beyond the first level, to finance the projects undertaken abroad,"
The immediate overseas subsidiary of the Indian company must be directly controlled by the Indian parent company through any of the modes of control recognised under the Indian Accounting Standards. the RBI added,
"In addition, the Indian parent company must directly hold a minimum 51% of its shareholding," the modified norms said.
The RBI also asked the banks to make an additional provision of 2% in addition to country risk provision applicable to all overseas exposures, against standard assets representing all exposures to step-down subsidiaries. (KNN Bureau)