The Reserve Bank of India (RBI) has further liberalised the rules for opening foreign currency accounts (FCA) under the liberalised remittance scheme (LRS) at the International Financial Services Centres (IFSCs), particularly at GIFT City. This regulatory relaxation opens new avenues for resident Indians, enabling them to utilise these accounts for a wider array of international financial activities.
Previously, foreign currency accounts at IFSCs were primarily used for investing in foreign securities and for the payment of fees for education to foreign institutions. The new regulations, however, have broadened the scope of permissible uses significantly. Resident Indians can now open FCAs at GIFT City for diverse purposes, including sending gifts to friends abroad, purchasing property, buying insurance, making fixed deposits, paying education loans, and funding overseas travel. An official from GIFT City commented on the development, stating, “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 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.” The enhanced LRS framework for GIFT City allows resident individuals to use their funds for a broader spectrum of financial services and products available at the IFSC. This includes insurance and fixed deposits in foreign currency, which benefits both IFSC banks and life insurance companies located within GIFT City, while providing Indian residents with more international investment opportunities.
In its notification, 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 permissible purposes under LRS encompass a wide range of activities, including the acquisition of immovable property abroad, overseas portfolio investments, private visits abroad, gifts and donations, maintenance of relatives abroad, overseas education, and medical treatment. This comprehensive expansion ensures that resident Indians can now more efficiently manage and diversify their international financial engagements. By facilitating these transactions through GIFT City, the RBI has significantly expanded the capabilities and appeal of the IFSC. This strategic move not only strengthens India’s position in the global financial landscape but also provides resident Indians with robust tools to manage their international financial affairs more effectively.
