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RBI may tighten remittance rules, bar offshore fixed deposits
RBI data showed that deposits under outward remittances by resident individuals rose sharply to $173.2 million in March from $51.62 million in February
The Reserve Bank of India (RBI) is looking to tighten norms for remittances sent abroad by resident Indians, barring them from holding foreign currency deposits with lock-in periods, Reuters reported, citing two unidentified people in the government.
The impending tweaks in regulatory policy reflect a cautious stance on the increase in overseas remittances and full convertibility of the rupee, with authorities seeking to safeguard foreign exchange reserves and manage currency volatility, the report said.
Investments made overseas by resident individuals come under RBI’s Liberalized Remittance Scheme (LRS), which allows remittances up to $250,000 in a single year for foreign education, travel, equity and debt investments to medical treatments.
The Reserve Bank is particular about ensuring that such deposits cannot be made even under alternate names, the report added, citing the people mentioned above who declined to be identified due to the confidentiality of the talks.
The RBI’s move is part of a comprehensive review of the legal framework governing the scheme to simplify the regulations, a priority highlighted by the central bank in its annual report.
RBI data showed that deposits under outward remittances by resident individuals rose sharply to $173.2 million in March from $51.62 million in February.
Outward remittances spike in March as it allows residents to maximize their annual limits and optimize taxes, making it the busiest month under LRS, but RBI is worried that a part of this is getting passively parked.
In FY25, total annual outward remittances under LRS remained high at nearly $30 billion, when compared with $31 billion a year ago.
India’s outward remittances under the scheme have steadily increased, particularly as fintech platforms and private banks have made global investing easier for retail investors, Reuters reported.
The revised rules will not affect permissible foreign investments in equities, mutual funds or property under the LRS, it added.
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