Foreign firms need to inform RBI on re-investments

Foreign companies operating directly or through joint ventures in India will now be required to furnish information about their reinvested earnings to the Reserve Bank of India.

The measure aims at bridging the gap in information on reinvested earnings, while collating data on foreign direct investments in the country.

The information will have to be provided by all companies, irrespective of whether they are using the automatic route or not.

Department of industrial policy and promotion, and the RBI, had agreed to introduce a form which foreign companies would have to submit to the RBI.

The present FDI inflows capture only the first equity investment of the companies. The inclusion of reinvested earnings will help increase the volume of FDI.

At present, the reinvested earnings are compiled only at the end of a financial year.

According to the industry ministry' latest data, India received FDI worth $ 3.75 billion during January-December 2004, a 49 per cent increase over the previous year's figure of $ 2.52 billion.

"At present, the RBI collates reinvested earnings on the basis of collective data received from its branches at the end of a financial year. Hence, the data are available after a time lag. Further, the data are collective and no company-specific information is available," an official said.

Officials pointed out that the industry ministry had information about reinvestments by a number of Japanese and South Korean companies, but no details were available on these reinvestments.