Companies with multiple overseas holding structures face enhanced RBI scrutiny

Several companies with complex holding structures for overseas subsidiaries are under RBI scrutiny for non-compliance with the two-layer overseas investment rule. The RBI has directed these companies to amend their structures to comply with India’s outward remittance rules, particularly focusing on structures established between 2016 and 2022. \r

The rule prohibits Indian entities from investing in foreign entities with more than two layers of subsidiaries. Companies are urged to seek post facto approval and complete a compounding process for existing structures. RBI's actions aim to clean up non-compliant structures, with companies expected to reduce subsidiaries to two layers and compound the issue by paying fines for non-compliance.