The Reserve Bank of India had been faced with a steep fall in rupee's value. This made the Reserve Bank to scrutinize all pending applications that included Apollo Tyres. This would be in accordance to new Indian norms for overseas investments.
According to a senior finance ministry official, all pending foreign investment applications would be decided upon new Indian norms. Earlier this month, the Reserve Bank of India imposed restrictions on Overseas Direct Investment (ODI). This allowed the RBI to check the outflow of foreign exchange in Indian companies.
The new legislation allowed corporations to purchase overseas businesses that are 100% of their net worth, compared to the previous norm which required 400%. This would be under the automatic route and would need prior approval from the RBI.
Although the application of Apollo Tyres for the USD2.5 billion buyout deal for US-based Cooper Tire & Rubber Co was filed before the new legislation came out, it would still be scrutinized by Indian regulators. This was in light of the new norm, said sources.
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