Mumbai: Indian financial regulators have stepped up scrutiny of overseas investments made by companies, family offices and regulated financial entities as the country grapples with mounting pressure on the rupee and increasing capital outflows. According to sources familiar with the matter, the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have recently intensified oversight of cross-border investment activities to ensure compliance with existing regulations and prevent potential misuse of investment routes.
The move comes at a time when India’s currency is facing headwinds from elevated global oil prices and foreign capital outflows. Authorities have already taken steps to safeguard foreign exchange reserves, including raising taxes on precious metal imports and encouraging measures aimed at conserving foreign currency.
Sources told Reuters that the RBI has issued at least ten queries over the past three weeks seeking detailed explanations regarding overseas investments undertaken by firms and family offices. The regulator is reportedly examining whether funds have been routed abroad without a clear commercial purpose or without adequate asset backing. The scrutiny is not being viewed as a restriction on legitimate overseas investments but rather as an effort to better understand the nature and pace of capital outflows and their potential impact on the country’s currency and foreign exchange reserves.
India maintains a partially open capital account, allowing businesses and individuals to make overseas investments under specific regulatory frameworks. Companies can invest abroad through the Overseas Direct Investment (ODI) route, subject to limits linked to their net worth and compliance requirements. Individuals, meanwhile, are permitted to remit up to $250,000 annually under the Liberalised Remittance Scheme (LRS) for purposes such as education, healthcare, travel and investment.
Regulators are reportedly focusing on large overseas investments routed through complex or opaque structures. Particular attention is being paid to cases involving offshore entities with aggressive valuations, limited transparency or unclear business objectives. Authorities are also examining whether some investors may be using ODI mechanisms primarily for private wealth management rather than genuine business expansion.
The RBI’s review has reportedly extended to family offices, many of which are structured as corporate entities. Such structures allow them to access higher remittance limits available under the ODI framework, compared to the restrictions imposed on individual investors through the LRS route. Sources indicated that the central bank is currently examining at least two instances where family offices may have used overseas investment channels for managing personal wealth rather than undertaking strategic business investments.
In addition to family offices, regulators are also assessing situations in which corporate groups have established overseas investment arms. Officials are seeking to determine whether these entities are being used primarily for legitimate international business expansion or for gaining exposure to foreign capital markets and investment opportunities.
SEBI has also reportedly increased oversight of proposals submitted by regulated entities, including investment funds and wealth management firms, seeking approval to establish overseas structures. According to sources, the market regulator has slowed the issuance of no-objection certificates in certain cases while conducting more detailed assessments of offshore investment plans.
A key area of concern involves the valuation of overseas assets. Regulators are reviewing instances where capital market investments and private assets appear to have received unusually high valuations. Since such valuations are typically conducted by SEBI-registered merchant bankers, authorities are also examining whether valuation practices are adequately justified and compliant with regulatory standards.
Data from the RBI highlights the growing scale of overseas investments by Indian entities. Overseas direct investment increased by 11 percent year-on-year to reach $48.39 billion during the financial year 2025-26. Meanwhile, remittances made by individuals abroad amounted to $28.9 billion during the same period, reflecting sustained interest in overseas education, healthcare, investments and asset diversification.
Experts believe the current regulatory approach is aimed at strengthening oversight rather than restricting legitimate international expansion. Legal and financial professionals note that regulators are seeking greater transparency regarding the commercial rationale behind overseas investments and ensuring that funds are deployed for clearly defined business purposes.
Market observers say the enhanced scrutiny reflects a broader effort by Indian authorities to balance the country’s growing global investment ambitions with the need to maintain financial stability.
