The Reserve Bank of India has permitted banks to give loans and non-funded credits to wholly-owned entities of overseas subsidiaries floated by Indian companies. The central bank has clarified that Indian companies must have more than a 51 per cent stake in the overseas subsidiary.
The facility is being granted with the view that overseas markets are expected to offer better opportunities of growth and bring in higher revenue and volumes to Indian corporates, the RBI said in its notification.
The banks could extend credits to such outfits out of funds held in foreign currency accounts such as FCNR (B), EEFC, RFC etc in respect of which they would have to manage the exchange risk, it said.