The Reserve Bank of India (RBI) has announced significant reforms to the Liberalised Remittance Scheme (LRS), specifically regarding the establishment of foreign currency accounts (FCA) at the International Financial Services Centres (IFSCs), with a particular focus on GIFT City. This regulatory overhaul is poised to unlock a multitude of opportunities for resident Indians, broadening the scope of permissible activities associated with these accounts.
Historically, foreign currency accounts in IFSCs were mainly utilised for investing in foreign securities and settling educational fees for overseas institutions. The newly announced regulations, however, represent a substantial shift, permitting resident Indians to engage in a diverse array of international financial transactions. Under the revised framework, individuals can now utilise FCAs at GIFT City for purposes such as sending gifts abroad, purchasing property overseas, acquiring insurance, making fixed deposits, servicing education loans, and financing international travel. A spokesperson from GIFT City emphasised the significance of this development, stating, “This pivotal move aligns GIFT IFSC with prominent global financial centres, allowing resident investors to fully leverage our platform for a broader range of overseas investments and expenditures. By clarifying the LRS usage for investments and facilitating transactions like insurance and education loan payments in foreign currency, the RBI has substantially enhanced the attractiveness and utility of GIFT IFSC.”
The enhanced LRS framework empowers resident individuals to tap into an expanded suite of financial services and products available at the IFSC. This not only supports IFSC banks and life insurance companies within GIFT City but also provides Indian residents with enriched international investment avenues. In its official communication, the RBI stated, “It has been decided that authorised persons may facilitate remittances for all permissible purposes under LRS to IFSCs for all current or capital account transactions in any other foreign jurisdiction (other than IFSCs) through an FCA held in IFSCs, availing financial services or financial products as per the International Financial Services Centres Authority Act, 2019 within IFSCs.” The range of activities permissible under LRS now encompasses a vast array, including acquiring immovable property abroad, overseas portfolio investments, private visits, gifts and donations, maintenance of relatives abroad, education, and medical treatment. This comprehensive expansion enables resident Indians to manage and diversify their international financial engagements more efficiently.
By facilitating these transactions through GIFT City, the RBI has markedly enhanced the capabilities and appeal of the IFSC. This strategic initiative not only bolsters India’s position in the global financial arena but also equips resident Indians with robust tools to effectively navigate their international financial affairs.
