RBI extends remittance eligibility for GIFT City Indian residents.

Under the Liberalised Remittance Scheme (LRS), the Reserve Bank of India (RBI) has extended the range of remittances to International Financial Services Centres (IFSCs), therefore enabling Indian residents to open foreign exchange accounts in GIFT City. This action seeks to enable remittances for obtaining financial services or products in line with the International Financial Services Centres Authority Act, 2019.

As of Wednesday, the RBI has let authorised individuals help remittances for IFSC-based financial products or services availability. Apart from IFSCs, it has allowed all current or capital account operations in any foreign jurisdiction using a Foreign Currency Account (FCA).

Residents can now open FCAs in IFSCs for these uses. This is a major change since remittances under LRS to IFSCs were limited to investments in securities within IFSCs and payment of fees for study to foreign universities or institutes in IFSCs in past times.

The new RBI rule will let resident Indians open fixed deposits in foreign currencies—such as dollars—in bank accounts in GIFT City. “This decisive move aligns GIFT IFSC with other global financial centres, allowing resident investors to leverage our platform for a wider range of overseas investments and expenditure,” said Tapan Ray, MD and Group CEO of GIFT City. Ray underlined how much GIFT IFSC’s appeal and usefulness had been improved by the RBI’s clarification on the usage of LRS for investments and facilitating transactions like insurance and loan payments in foreign currencies.

High-net-worth individuals should gain from this policy shift since it offers insurance against inflation and depreciation against the US currency, hence strengthening the banking environment at GIFT IFSC. Using the FCA account, residents can now invest outside of India subject to an LRS limit of $250,000 annually.

Partner at EY India Jaiman Patel said, ” Previously not allowed, insurance and bank fixed deposits in foreign currencies are now permissible for resident Indians. This action is intended to help IFSC banks as well as open new prospects for life insurance firms running under GIFT IFSC, thereby improving accessibility and flexibility for Indian resident people looking for overseas investment prospects.”

Although the new rules allow a wider spectrum of activities, it is yet unknown if LRS monies could be invested in derivatives under IFSC jurisdiction. Still, this evolution will greatly improve the investing environment for Indian citizens by providing more freedom and protection for their foreign financial operations.