Banks can fund cos for JVs abroad: RBI

The Reserve Bank of India (RBI) has allowed Indian banks to extend financial assistance to companies for acquisition of equity in overseas joint ventures, wholly-owned subsidaries or in other overseas companies.

"It has been decided to allow banks to extend financial assistance to Indian companies for acquisition of equity in overseas joint ventures/wholly owned subsidiaries or in other overseas companies, new or existing, as strategic investment, in terms of board approved policy, duly incorporated in the loan policy of the bank," the RBI said in a notification here.

The RBI added that such a policy should include overall limit on such financing, terms and conditions of eligibility of borrowers, security and margin.

Earlier, the RBI had said that the promoters contribution towards the equity capital of an overseas company should come from their own resources and banks should not normally grant advances to take up shares of other companies.

The regulator has also allowed bank boards to frame their own guidelines and safeguards for such lendings but added that such acquisitions should be beneficial to the company and the country and should be subject to compliance with the statutory requirements under Section 19(2) of the Banking Regulation Act, 1949.