You could say India has put the brakes on some of the outflow as the rupee comes under fire. People in the know tell us the RBI and SEBI have ratcheted up their scrutiny of companies and family offices, firing off no fewer than 10 questions in the last three weeks to see if the remittances hold water.
It’s not so much a hard line as a probe into whether big-ticket outward investments are making the currency problem worse. The message is clear: you can still move your capital, but the why, how much and in what form has to be defensible these days.
What triggered the crackdown
The rupee has been taking a hit from oil and foreign portfolio outflows, so policymakers have made conserving foreign exchange a top priority. You’ll see it in the higher taxes on some metal imports and in how they’re watching the speed at which money is being channeled out by the corporate and wealth set.
A source puts it like this: they want to know if any of it has left the country for no good reason or without a solid asset to show for it. It’s an unusual kind of step, and one that makes sense given the volatility and the pressure on reserves right now.
How the oversight is being applied
There have been at least 10 requests for information sent to various firms and wealth vehicles in the last few weeks. We’re not here to put a damper on legitimate cross-border work, but to get a read on what’s driving the outflows, says one person.
Regulators are on to a few things that can heighten risk when times are tough:
– Opaque holding structures where you can’t tell who is behind them
– Offshore assets with a valuation that seems too good to be true
– ODI being put to use for private wealth management
– Some of the wagers in the capital markets through a company’s investment arm
Family offices and corporate structures under the lens
If you ask two of our sources, family offices are high on the list. Some of them are put in place as corporate entities to get around the limits on overseas direct investment. The RBI is looking at a couple of cases where the ODI path may have been a way to handle personal finances.
Then there are the corporates that have put together an overseas arm to be a conduit for some capital market exposure, as opposed to a true strategic play. If a deal is on the larger side or complicated, expect to do more paperwork and maybe get pre-approval.
Rules, thresholds and the data backdrop
India’s capital account is only open to a point. Firms can put money to work via the ODI route, provided they have the net worth and a purpose for it. For the individual, the Liberalised Remittance Scheme allows for $250,000 a year for the likes of schooling, medical bills and the like.
The numbers don’t lie. The RBI has the figures: in 2024-25, ODI was up 11% to $48.39 billion, and individuals sent $28.9 billion out of the country. As the volumes have gone up and the rupee has softened, so has the watchfulness of the supervisors.
SEBI and valuations: what is changing
SEBI has been a little slower to hand out no-objection letters to the regulated ones who want to put something in place overseas, a third source says. They are putting a flag on any proposal where the pricing on a capital market or private asset bet looks a bit on the aggressive side.
Normally a merchant banker with a SEBI registration will do the valuation, and the regulators are making sure none of them are padding the numbers. “This is about better oversight and some calibration,” says Moin Ladha of Khaitan & Co. “Not a step back on the expansion of Indian companies and entrepreneurs.”
We reached out to the RBI and SEBI on Tuesday with some emails, but we didn’t get a reply. We can’t say who got the letters from the regulator. Those we spoke to asked to be left out of it since they can’t talk to the press.
