RBI steps up checks on big overseas investments as the rupee weakens
· 5 min read · Tryvest
Why the RBI is reportedly asking banks to vet large overseas deals, what ODI and the LRS limit are, and how a weaker rupee affects you.
India's central bank is reported to have asked banks to look much more closely at very large investments that Indian companies make abroad. The step, reported on Tuesday, 20 October 2026, comes as the rupee hovers near 95 to the US dollar and money keeps flowing out of the country. It is not a ban, and it does not change the yearly limit for ordinary people who send money or invest overseas.
What happened
According to a report in The Economic Times, later carried by Bloomberg, the Reserve Bank of India (RBI) sent major banks a standard checklist last week. The report was based on two people familiar with the matter, and the RBI did not respond to Bloomberg's request for comment, so the details come from those sources rather than from a public circular.
The checklist reportedly applies to two kinds of deals:
- overseas investments of more than $1 billion, and
- deals larger than the regular limit of four times the investing company's net worth.
For these, banks are expected to test the value of the foreign asset themselves, for example the premium being paid and the terms of any share swap, instead of simply accepting a valuation report. They are also asked to look at the quality of the company's earnings, its past investments abroad, its existing commitments and whether it could cope with a financial shock. Both reports stress that the RBI has not put any new restrictions on such investments.
Why now: the rupee and money leaving India
The rupee has lost more than 5% against the dollar this year. On Monday, 19 October, it ended almost unchanged at about 94.9 per dollar. Markets and currency trading are closed on Tuesday for Dussehra.
Several things are pushing the rupee down. Crude oil is expensive, with Brent near $108 a barrel on Monday, and India pays for most of its oil in dollars. Foreign investors have also been taking money out. On top of that, Indian companies and wealthy families have been sending more money abroad. Overseas direct investment by Indian firms has roughly doubled in two years, according to RBI data cited by Bloomberg and figures in an SBI Research report published on 15 October.
The RBI has already taken other steps. It raised its repo rate at its October policy meeting, its first increase in years, partly to fight inflation, and it has tightened rules on how companies hedge currency risk. Last week's SBI Research report also suggested curbs on "non-essential" remittances and closer checks on overseas investment.
The idea behind it: ODI, LRS and the rupee
What overseas direct investment (ODI) is. When an Indian company buys or sets up a business abroad, taking control of it or more than 10% of its shares, that counts as overseas direct investment. It is different from simply buying a few shares of a foreign company on a stock exchange, which is treated as portfolio investment.
What the Liberalised Remittance Scheme (LRS) is. Individuals have their own route. Under the LRS, every resident individual, including a minor, can send up to $2,50,000 abroad in a financial year (April to March) for permitted purposes. These include studies, travel, gifts and investing abroad, such as in foreign shares. The RBI's own FAQ also lists things the scheme cannot be used for, such as trading in foreign currency abroad or paying margins to overseas exchanges. The reported checklist is about very large company deals; it does not change this limit.
Why money going out affects the rupee. A currency's price works like any other price. To invest abroad, a company has to sell rupees and buy dollars. When many people need dollars at the same time, for oil, for foreign investments or for repaying loans, the dollar gets more expensive in rupee terms. That is what a "weaker rupee" means.
Why a weaker rupee matters to you. Imported goods such as fuel, electronics and some medicines get costlier, which can push up inflation. Studying or travelling abroad costs more in rupees. On the other hand, exporters, such as IT services companies that earn in dollars, receive more rupees for the same work. For anyone who invests in international funds, part of the return depends on the exchange rate too, which is one more reason to understand currency risk before investing.
What to keep an eye on
- Wednesday, 21 October 2026: NSE and BSE reopen after the Dussehra holiday.
- Every Friday: the RBI publishes India's foreign exchange reserves in its weekly statistical supplement.
- The minutes of the October policy meeting and the RBI's next policy meeting in December, where it will explain its view on inflation and the rupee.
- Any official RBI circular on overseas investment. So far the checklist is known only through media reports.
Key points
- The RBI has reportedly asked banks to check overseas investments above $1 billion, or above four times a company's net worth, far more closely.
- It has not banned or restricted overseas investment, and the RBI has not commented publicly on the report.
- The rupee has fallen more than 5% this year and was about 94.9 per dollar on 19 October, under pressure from costly crude and money leaving India.
- Individuals can still send up to $2,50,000 a year abroad under the LRS.
- A weaker rupee makes imports, foreign travel and studies costlier, and changes the rupee value of foreign investments.
To see how rising prices eat into the value of money, try the Tryvest lesson on inflation, or practise investing with virtual money in the simulator.