India widens use of foreign currency accounts at GIFT City

The Reserve Bank of India (RBI) this week issued a notification further liberalizing rules for opening foreign currency accounts at GIFT City international financial services center (IFSC).

Indians can now open foreign currency accounts at GIFT City under the liberalized remittances scheme (LRS) to make fixed deposits, buy insurance, acquire property, make education loan payments and fund overseas travel.

GIFT City, which was launched in 2011 by then Gujarat chief minister and now Prime Minister Narendra Modi in the western Indian state, has been built to rival regional financial centers such as Dubai.

Under LRS, resident Indians, including minors, can remit up to $250,000 overseas each fiscal year for education, medical expenses and certain types of investments.

Thus far, remittances under LRS to IFSCs were permitted only for making investments in securities of companies listed abroad, and for payment of fees for education to foreign universities or foreign institutions at GIFT City.

“On a review, it has been decided that authorized persons may facilitate remittances for all permissible purposes under LRS to IFSCs for availing financial services or financial products as per the International Financial Services Centres Authority Act, 2019 within IFSCs; and all current or capital account transactions, in any other foreign jurisdiction (other than IFSCs) through an foreign currency account held in IFSCs,” the RBI notification said.

The easing of rules is likely to help banking and financial services at GIFT City, such as payments and insurance, while also giving the government “visibility” over how money transferred overseas is deployed, Reuters reported, citing consultants.

The government has taken a slew of steps to boost activity at GIFT City, including allowing the listing of Indian firms and allowing the wealthy to open family investment funds.

This week alone, Paris-headquartered multinational universal bank BNP Paribas and Japan’s Sumitomo Mitsui Banking Corp. announced the launch of their operations at GIFT City, while Australia’s Deakin University welcomed its inaugural batch of 45 students at its new campus in the international financial services center.

Real-time dollar settlement in GIFT City is likely to become operational later this year or by early next year, Bloomberg had reported last month, citing  a senior government official aware of the developments, in a step that could boost the country’s appeal to foreign investors.