Strict investigation is coming! RBI to tighten the rules for foreign remittances by residents; What is being planned here
The Reserve Bank of India intends to strengthen the rules related to international money transfer, namely with new restrictions on foreign remittances by Indian residents, new restrictions on foreign exchange deposits that include lock-in period.The RBI’s Hollen Relations Scheme (LRS) controls foreign investment by individuals, allows residents to send up to $ 250,000 annually for various purposes, including investing in foreign education, travel, equity and debt devices, and health services.An official told Reuters that the RBI would modify its guidelines to prevent international transfer from using to deposit money in foreign interest-bearing accounts or time deposits.“This is similar to passive money shifting, which is still a red flag for RBI in controlled capital regime,” the official said.According to sources, India’s conservative approach to external dispatch and to increase the rupee convertibility is clear in these proposed amendments, as officials work to protect forex stores and control the ups and currency in currency.The central bank intends to implement measures to prevent such deposits from being done under separate naming, according to the second source, in interaction with the government.Also read Rs 4.58 crore has been closed from customer accounts, FD! How former ICICI Bank Relations Manager pulled a stunning fraud – explained in 10 digitsThe purpose of the initiative is to streamline the rules within the legal structure of the plan, which is align in its annual report with the declared objectives of the central bank.According to RBI data, external remittances of individual residents increased by $ 173.2 million in March to increased from $ 51.62 million to $ 173.2 million in February.The march traditionally sees external dispatch as residents want to use their annual allowances and manage tax implications. While this remains the peak period of the plan under LRS, RBI has expressed concern about potentially passive fund parking.The plan for the financial year 2024/25 saw a slight decrease in total external remittances, but maintained sufficient level at $ 30 billion compared to $ 31 billion in the previous year.The program has shown a steady increase in outbound transfer from India, especially international investment facilities for individual investors with Fintech companies and private banking institutions.Also read Remittance: Donald Trump’s ‘The One Big Beautiful Bill’ can be ugly for Indians in AmericaAccording to the second official, “This step addresses the growing misuse of the plan as a vehicle for passive capital exports”.“It aligns the scheme more closely with a calibrated approach to India’s capital account convertibility.”India holds a prudent stance about unrestricted external flows, mainly to protect its foreign exchange reserves and regulate the currency.The updated rules will not authorize foreign investment in shares, mutual funds or real estates under LRS, as confirmed by another officer.
