As part of efforts to flush out excess foreign capital, Reserve Bank has allowed resident Indians to open accounts in banks outside the country and transfer up to 100,000 dollars (about Rs 41 lakh) a year in them without its approval.
Individuals can now open, maintain and hold foreign currency accounts with banks outside India, the Reserve Bank said, while clarifying the provisions of the Liberalised Remittance Scheme (LRS).
The RBI clarification comes on the heels of the Union government tightening External Commercial Borrowings (ECBs) to restrict inflow of foreign capital to prevent appreciation of the Indian currency.
RBI and the Centre have been encouraging people and corporates to invest overseas to tide over the problems created by excessive inflow of foreign capital.
The RBI said under LRS, resident individuals can remit up to $100,000 in a financial year to acquire and hold immovable property, make investment in financial instruments or purchase any other asset without any prior approval.
Resident individuals, RBI clarified, could utilise the amount deposited in foreign bank accounts to invest in mutual funds, venture funds, unrated debt securities and promissory notes under the scheme.
Under the LRS, which was originally announced in 2004 to simplify and liberalise foreign exchange facility available to resident individuals, an individual will have to quote his or her Permanent Account Number (PAN) to avail the benefit of the scheme, it said.
RBI further said the scheme will cover small remittances in the form of gifts and donations up to $5,000 (about Rs 2.1 lakh), implying there will be no separate limit for gifts and donations.
Individuals can also take benefit of the scheme to acquire stocks under the employee stock option plan of foreign companies provided they are not linked to American Depository Receipts (ADRs) or Global Depository Receipts (GDRS), which are outside the purview of LRS.
The scheme can also be used by non-residents to repay loans taken abroad on return to India, the central bank said.
It will also permit reinvestment of the income earned on investments made under the scheme, provided the total amount of remittances and reinvestments does not exceed the limit of $100,000 prescribed under the LRS, RBI said.
The scheme, however, cannot be used to pay for margins and margin calls to overseas stock exchanges, the central bank clarified.
The central bank also clarified that individuals will not be allowed to invest money, directly or indirectly, in countries like Bhutan, Nepal, Mauritius and Pakistan through the scheme. Also, there will be restriction on transferring money to individuals and entities that are identified as capable of committing acts of terrorism.
RBI also clarified that individuals will not be permitted to buy lottery or sweepstakes tickets or proscribed magazines and items restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000
As published on sify.