In a move aimed at enhancing financial flexibility within Gujarat International Finance Tec-City, the Reserve Bank of India has broadened the scope of remittances under the Liberalised Remittance Scheme.
This development now permits Indian residents to open foreign currency accounts within GIFT City's International Financial Services Centres. Remittance in financial terms means sending money to someone in another country in their currency.
Earlier, the remittances were only allowed for the payment of fees for education at foreign universities and investments in IFSCs, the central bank said in a statement on Wednesday.
The decision, announced by the RBI on Wednesday, authorises certain entities to help send money abroad to access financial services or products, in accordance with the IFSC Authority Act, 2019. This measure is expected to streamline international financial transactions for Indians.
The International Financial Services Centre is a specialised area within GIFT City, where international financial transactions are conducted. It serves both Indian residents and foreign entities under a secure regulatory environment.
Additionally, the central bank also permitted all current or capital account transactions, except those in IFSCs, to be conducted through a Foreign Currency Account held in IFSCs.
Indian residents can now open Foreign Currency Accounts within IFSCs, offering greater flexibility in managing foreign currency transactions. Essentially meaning, Indian residents can hold money in foreign currencies like US dollars or euros in accounts called FCAs.
FCAs can be used for these specific purposes by Indian residents:
International Investment
With FCAs, Indians can invest in foreign stocks (shares in companies), bonds (like loans to governments or companies), or even fixed deposits (similar to bank accounts, but in foreign currency). This means they can earn interest or profits in foreign currencies.
Paying For Education And Travel
People can use these accounts to pay for things like tuition fees for studying abroad or for expenses during international travel. It's a way to manage money more conveniently when dealing with foreign transactions.
Diversifying Risks
By holding money in foreign currencies and investing abroad, Indians can spread their financial risks. This can help protect savings from changes in the Indian economy or currency values.
LRS Limit
The existing annual limit for remittances remains unchanged at $250,000 (approximately Rs 2.06 crore).
The RBI's recent action means that Indian residents now have more options to manage their money internationally through GIFT City. Overall, it makes it easier for Indian residents to do more with their money globally, from investing to managing expenses, all while benefiting from the facilities and regulations of GIFT City.
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