The Reserve Bank of India (RBI) has issued a circular dated 19 June 2018 (Circular) (Ref: RBI/2017-18/204. A.P. (DIR Series) Circular No. 32) amending the liberalised remittance scheme (LRS) as set out in the Master Direction – LRS issued from time to time (Master Directions).
Pursuant to the Circular:
The LRS was notified by the RBI in March 2004 as a measure to facilitate resident individuals to remit funds abroad for permitted current or capital account transactions, or a combination of both. Under the LRS, authorised dealer banks (ADs) are authorised to permit remittances by resident individuals within the limits prescribed from time to time. The LRS limit has been revised periodically, in-line with the prevailing macro and micro economic conditions. The current limit of US$ 250,000 per financial year has been in effect since 26 May 2015.
Key Highlights of Circular
Reporting by ADs and overall monitoring by the RBI has increased considerably pursuant to the Circular. ADs are now required to make the following submissions:
In addition, ADs are required to comply with the following:
The alignment of the definition of ‘relative’ with the 2013 Act is a positive move by the RBI in removing ambiguity in relation to the LRS. Though the additional reporting increases the burden on Ads, this is in line with the RBI’s recent emphasis on the need to monitor remittances overseas more strictly and maintain proper records of such remittances. The consequence of this could also be more procedural work and hassles for persons remitting money under the LRS but overall it is a good step to track remittances abroad in the wake of recent high-profile frauds.