India plans curbs on overseas remittances, offshore deposits may be barred: Sources

Time of India

2 days ago

India
's central bank plans to tighten rules for
overseas remittances
by resident Indians, barring them from holding
foreign currency deposits
with lock-in periods, two government sources said.
The
Reserve Bank of India
(RBI) will amend regulations to prevent overseas transfers from being used to park money in time deposits or other interest-bearing accounts abroad, one of the sources said.
"This is akin to passive wealth shifting, which is a red flag for the RBI in a still-controlled capital regime," the first source familiar with the thinking of the central bank said.
by Taboola
by Taboola
Sponsored Links
Sponsored Links
Promoted Links
Promoted Links
You May Like
Play War Thunder now for free
War Thunder
Play Now
Undo
The proposed changes reflect India's cautious stance on a rise in outward remittances and full convertibility of the rupee, as authorities strive to safeguard
foreign exchange reserves
and manage currency volatility, the sources said.
(Join our
ETNRI WhatsApp channel
for all the latest updates)
Overseas investments by individuals fall under the central bank's Liberalised Remittance Scheme (LRS) - which allows resident Indians to remit up to $250,000 in a single year - for purposes ranging from foreign education, travel, equity and debt investments to medical treatments.
Live Events
You Might Also Like:
Rise in repatriation reflects market maturity, says RBI Governor amid dip in net FDI
While discussions with the government are ongoing, the RBI aims to ensure such deposits cannot be made even under alternate names, the second source said.
Both sources declined to be identified due to the confidentiality of the talks. The
finance ministry
and the RBI did not respond to emailed requests for comment.
The 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 typically spike in March as it allows residents to maximise their annual limits and optimise taxes, making it the busiest month under LRS but the RBI is concerned that a portion of this may be getting passively parked.
You Might Also Like:
Banks police business card swipes, ask users to swear off misuse
For
financial year 2024/25
, total annual outward remittances under the scheme dipped but remained high at nearly $30 billion compared with $31 billion a year ago.
The sources did not disclose the amount currently held in foreign currency deposit accounts, but said the move is "preventative".
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.
"The move addresses a growing misuse of the scheme as a vehicle for passive capital export," the second source said.
"It also aligns the scheme more closely with India's calibrated approach to capital account convertibility."
India has remained cautious on allowing unrestricted outflows, partly to preserve its foreign exchange reserves and manage currency volatility. The revised rules will not affect permissible foreign investments in equities, mutual funds or property under the LRS, the second source said.