The Reserve Bank of India (RBI) has issued a circular dated 10th July 2024, outlining significant changes regarding the utilization of Liberalized Remittance Scheme (LRS) limits for payments to IFSCA Official Units
Key Changes:
1. Expanded Activities: RBI regulations now allow Authorized Persons to facilitate LRS remittances to IFSCs for a range of activities, including:
- Availing Financial Services/Products: This includes the entire spectrum of offerings permitted under the IFSCA Act, 2019.
- Current/Capital Account Transactions: These can now be conducted in any foreign jurisdiction (except IFSCs) through a Foreign Currency Account (FCA) with International Banking Units (IBUs) in IFSCs.
2. Previous Restrictions: LRS remittances to IFSCs were previously restricted to: - Investments in IFSC securities (excluding those issued by Indian entities) - Education fees for foreign universities/institutions within IFSCs
3. New Opportunities: Resident individuals can now open FCAs in IFSCs for these expanded permissible purposes under the LRS. This offers improved access to financial products and services.
Implications for Resident Indians (RIs) and GIFT IFSC:
- Increased investment opportunities for RIs - Utilizing FCAs in IFSCs for current/capital account transactions
- A positive step towards establishing IFSCs as a viable financial hub
- Attraction of foreign investment
Source: Circular no. RBI/2024-25/49 A.P. (DIR Series) Circular No. 15 dated July 10, 2024.
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