RBI Asks Cos To Disclose Anti-Money Laundering, KYC, Due Diligence Checks On Foreign Investments

The Reserve Bank of India (RBI) has intensified its scrutiny of overseas direct investments (ODIs) by Indian companies, seeking detailed information on foreign business partners, joint ventures and subsidiaries as part of a broader effort to strengthen oversight of outbound capital flows.

The Economic Times (ET) reported the matter citing RBI's questionnaire sent to several banks.

Banks have been instructed to obtain additional information from corporate clients with overseas investments and share it with the central bank, the report said.

Among the new requirements are details of anti-money laundering (AML) measures, due diligence procedures and know-your-customer (KYC) checks carried out on foreign partners and co-investors — information that has not typically been sought in the past.

The questionnaire, which was reportedly circulated to several private and multinational banks towards the end of June, also seeks operational and financial information on overseas entities.

Companies have been asked to provide financial data dating back to 2021-22, along with details on energy consumption, research and development (R&D) expenditure, employee headcount, staff costs, and whether overseas entities maintain physical offices and operate independently, as per ET.

RBI Seeks Broader Financial Picture

In its communication to banks, the RBI said the purpose of the exercise is to understand the "business rationale, capital flow dynamics, and economic implications of the investments, and assess its coherence with India's broader macroeconomic and capital account management objectives," as per the ET report.

The RBI has also requested details of dividends and loan interest received by Indian parent companies, trade transactions between parent firms and overseas entities, dealings with step-down subsidiaries, and instances where capital has been written off, the report added.

Inadequate scrutiny of overseas partners could expose companies to risks such as fraud, fund diversion or round-tripping through shell entities.

Such information could help identify cases where overseas ventures may have been used to divert funds before being declared unsuccessful.

Outbound investments by Indian companies have risen sharply, with ODIs increasing to around $34 billion in FY26, compared with approximately $11 billion five years earlier, the report said.