Strict checks coming in! RBI to tighten rules for overseas remittances by resident Indians; here’s what is being planned

The RBI’s Liberalised Remittance Scheme (LRS) governs overseas investments by people. (AI picture)

The Reserve Bank of India intends to strengthen rules regarding worldwide cash transfers, that is, overseas remittances by Indian residents, with new restrictions on overseas foreign money deposits that contain lock-in durations.The RBI’s Liberalised Remittance Scheme (LRS) governs overseas investments by people, allowing resident Indians to ship up to $250,000 yearly for varied functions, together with overseas training, journey, funding in fairness and debt devices, and healthcare providers.The RBI will modify its tips to cease worldwide transfers from being utilised to deposit funds in overseas interest-bearing accounts or time deposits, an official informed Reuters.“This is akin to passive wealth shifting, which is a red flag for the RBI in a still-controlled capital regime,” famous the official.India’s conservative strategy in the direction of growing outward remittances and full rupee convertibility is evident in these proposed modifications, as officers work to shield foreign exchange reserves and management foreign money fluctuations, in accordance to the sources.The central financial institution, while in talks with the federal government, intends to implement measures stopping such deposits from being made beneath completely different nomenclatures, as per the second supply.Also Read | Rs 4.58 crore siphoned off from buyer accounts, FDs! How former ICICI Bank relationship supervisor pulled off a surprising fraud – defined in 10 factorsThe initiative goals to streamline rules throughout the scheme’s authorized construction, aligning with the central financial institution’s said goals in its yearly report.According to RBI statistics, particular person residents’ outward remittance deposits elevated considerably to $173.2 million in March, up from $51.62 million in February.March historically sees heightened outward remittances as residents search to utilise their yearly allowances and handle tax implications. Whilst it stays the scheme’s peak interval beneath LRS, the RBI has expressed issues about potential passive fund parking.The complete outward remittances beneath the scheme for the monetary 12 months 2024/25 confirmed a slight lower however maintained substantial ranges at roughly $30 billion, in contrast to $31 billion within the earlier 12 months.The outbound transfers from India by means of the programme have proven constant development, particularly with fintech firms and personal banking establishments facilitating worldwide investments for particular person buyers.Also Read | Remittances tax: How Donald Trump’s ‘The One Big Beautiful Bill’ might prove to be ugly for Indians within the US“The move addresses a growing misuse of the scheme as a vehicle for passive capital export,” in accordance to the second official.“It also aligns the scheme more closely with India’s calibrated approach to capital account convertibility.”India maintains a prudent stance relating to unrestricted outward flows, primarily to safeguard its foreign exchange reserves and regulate foreign money fluctuations.The up to date rules won’t influence authorised overseas investments in shares, mutual funds or actual property beneath the LRS, as confirmed by the second official.