RBI allows resident Indians to open Foreign Currency Accounts in GIFT IFSC
OVERVIEW:
-
In a new development country’s central bank, the Reserve Bank of India has extended its purview of remittances to the International Financial Services centres(IFSC).
-
The RBI widened the scope of the Liberalised Remittance Scheme (LRS) by allowing residents to open foreign currency accounts to access financial serrvices and products at GIFT City.
-
By permitting LRS transactions within GIFT IFSC, RBI aims to enhance financial flexibility and promote international transactions from within the IFSC framework.
ABOUT LIBERALISED REMITTANCE SCHEME (LRS):
-
The Liberalised Remittance Scheme (LRS) was introduced by the Reserve Bank of India (RBI) in 2004 to facilitate Indian residents outward remittances for permissible current account and capital account transactions.
-
It allows individuals to remit money abroad for purposes such as education, medical treatment, investment in stocks and real estateand more within specified limits.
WHAT CHANGES HAS THE RBI MADE?
RBI has expanded the LRS program specifically for transactions involving GIFT City. India’s International Financial Services Centre (IFSC). Here are the key changes:
-
Opening Foreign Currency Accounts (FCAs): Resident Indians can now open FCAs at banks located within GIFT CITY IFSC. This means Indians can have a bank accounts denomiated in foreign currency like US dollar.
-
Wider remittance purposes: Previously , under LRS, funds sent to GIFT IFSC couls only be used for specific investments in securities and educational fees. Now, the RBI allows remmittances 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.
– All current or capital account transactions, in any other foreign jurisdiction (other than IFSCs) through an FCA held in IFSCs
-
Investment opportunities: With the FCA, residents can invest overseas through this account, as long as they stay within the annual LRS limit of $250,000.
BENEFITS OF THE CHANGES:
-
More options for overseas investments: This widens the range of investment opportunities for Indian residents, potentially offering better returns and diversification benefits.
-
Greater flexibility for using funds abroad: The broader range of permissible purposes under LRS for GIFT IFSC provides residents with more freedom in managing their finances internationally.
-
Development of GIFT IFSC: This move by the RBI is expected to boost the growth of GIFT City as a financial hub by attracting more residents to utilize its financial services and products.
CONCLUSION:
-
The expansion of the Liberalised Remittance Scheme (LRS) to include GIFT IFSC marks a significant step towards enhancing India’s international financial services.
-
This move is expected to attract more investors and facilitate smoother international transactions, reinforcing GIFT City’s position as a competitive global financial hub.
-
By promoting financial flexibility and compliance within the IFSC framework, RBI underscores its commitment to liberalizing capital account transactions and bolstering India’s presence in the global financial landscape.