
The Reserve Bank of India (“RBI”) in a circular issued on July 10th, 2024, made way for individuals resident in India to open Foreign Currency Account (“FCA”) in International Financial Services Centres (“IFSCs”) under the Liberalised Remittance Scheme (“LRS”).
Hitherto, remittances under the LRS to IFSCs were permitted solely for two purposes:
Investment in Securities within IFSCs: This includes all securities, except those issued by entities or companies resident in India (outside IFSCs).
Payment of Educational Fees: This pertains to fees for education at foreign universities or institutions located within IFSCs, for courses specified in the Central Government’s gazette notification No. SO 2374(E) dated May 23, 2022.
In a move that significantly enhances the appeal and utility of the GIFT City (Gujarat International Finance Tec-City) in Gujarat, the only IFSC in India so far, the RBI has allowed resident individuals to open FCA in IFSCs for the following permissible purposes:
Availing Financial Services or Products: This includes any financial services or products as stipulated by the International Financial Services Centres Authority Act, 2019, within IFSCs.
Current or Capital Account Transactions: This encompasses all permissible current or capital account transactions in any foreign jurisdiction (outside IFSCs) conducted through a Foreign Currency Account (FCA) held in IFSCs.
Accordingly, Authorized Persons may facilitate remittances for all permissible purposes under the Liberalised Remittance Scheme (LRS) to International Financial Services Centres (IFSCs).
This decisive move aligns GIFT IFSC with other global financial centres, allowing resident investors a wider range of overseas investments and expenditures. By clarifying the use of LRS for investments and enabling transactions like insurance and education loan payments in foreign currency, the RBI has significantly enhanced the attractiveness and utility of GIFT IFSC.”
This regulatory change by the RBI significantly enhances the financial flexibility and opportunities available to resident individuals who can now better manage their foreign assets, diversify their investments, and engage more seamlessly with international markets. This change not only aligns India with global financial practices but also promotes greater financial inclusion and economic growth, ultimately benefiting the country's financial ecosystem.
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