admin In a strategic move to increase financial flexibility within Gujarat International Finance Tec-City (GIFT City), the Reserve Bank of India (RBI) has widened the scope of remittances under the Liberalised Remittance Scheme (LRS). This significant development now allows Indian residents to open foreign currency accounts (FCAs) within GIFT City’s International Financial Services Centres (IFSCs). This initiative, announced by the RBI on Wednesday, is set to streamline international financial transactions for Indian residents, offering them new avenues for managing their foreign currency holdings and investments.
Previously, remittances under the LRS were restricted primarily to paying educational fees at foreign universities and investments in IFSCs. The recent decision by the RBI broadens this scope significantly, enabling Indian residents to remit funds for a wider range of purposes. This includes accessing financial services or products internationally, in accordance with the IFSC Authority Act, 2019. The IFSC within GIFT City is a specialised zone where international financial transactions are conducted, serving both Indian and foreign entities under a robust regulatory framework.
Enhanced Financial Flexibility for Indian Residents
With this new regulation, Indian residents can now hold foreign currency in accounts such as FCAs within IFSCs. These accounts can be maintained in major foreign currencies like US dollars or euros, providing greater flexibility in managing foreign currency transactions. The change allows residents to diversify their investments and financial risks by holding and earning in foreign currencies, potentially shielding their savings from fluctuations in the Indian economy or currency devaluation.
The use of FCAs extends to several practical purposes. Indian residents can now invest in foreign stocks, bonds, and fixed deposits, earning interest or profits in foreign currencies. Additionally, these accounts can be used for paying tuition fees for studying abroad or managing expenses during international travel, making foreign transactions more convenient.
However, the existing annual limit for remittances under the LRS remains unchanged at $250,000 (approximately Rs 2.06 crore). Despite this, the RBI’s recent amendments provide Indian residents with enhanced opportunities to manage their finances on a global scale through the facilities and regulations of GIFT City. This move is expected to significantly benefit those looking to diversify their investments and manage international expenses more efficiently.
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