The Reserve Bank of India (RBI) has broadened the scope of remittances to International Financial Services Centres (IFSCs) through the Liberalised Remittance Scheme (LRS), allowing Indian residents to open foreign currency accounts in GIFT City.
On Wednesday, RBI announced that authorised entities can now facilitate remittances for accessing financial services or products under the International Financial Services Centres Authority Act, 2019 within IFSCs. Moreover, the central bank has also authorized all types of financial transactions—both current and capital accounts—in any foreign location outside of IFSCs, facilitated through a Foreign Currency Account (FCA) based in IFSCs.
For these permissible uses, resident individuals can now open a Foreign Currency Account (FCA) in IFSCs, as per RBI’s statement.
Currently, under LRS, remittances to IFSCs are limited to investments in securities within IFSCs (excluding those issued by Indian entities outside IFSCs) and payment of educational fees to foreign universities or institutions within IFSCs for specific courses. This latest decision by RBI allows Indian residents to also deposit foreign currency like dollars into fixed deposits at banks in GIFT City.
There’s a limit on how much money you can send abroad under LRS. Currently, the limit is $250,000 (around ₹2.06 crore) per year without needing special permission from the RBI.
While the RBI’s decision offers greater flexibility, it’s important to consult with a financial advisor before opening an FCA. They can help you understand the risks and benefits involved, considering your specific financial goals.
“This proactive step aligns GIFT IFSC with global financial hubs, enabling Indian investors to utilize our platform for a broader range of international investments and expenses. By making it clearer how LRS can be used for investments and supporting transactions like insurance and paying education fees in foreign currency, the RBI has greatly improved the attractiveness and practicality of GIFT IFSC,” commented Tapan Ray, MD and Group CEO of GIFT City.
A Step Towards a More Globalized Economy
The RBI’s move is seen as a positive step towards integrating India’s financial system with the global market. By allowing FCAs and facilitating easier foreign transactions, this decision can benefit both individuals and businesses looking to expand their international reach.