RBI eases LRS norms for investment through GIFT IFSC

The Reserve Bank of India has expanded the scope of remittances to International Financial Services Centers (IFSCs) under the Liberalized Remittance Scheme (LRS).

The apex bank on Wednesday allowed authorized persons to facilitate remittances for availing financial services or products within IFSC as per the International Financial Services Centers Authorization Act, 2019. It has also allowed current or capital account transactions abroad (except foreign IFSC) through Foreign Currency Account (FCA).

For these purposes, resident individuals can open FCA at GIFT IFSC.

This will allow resident Indians to open a fixed deposit in dollars in a bank account in GIFT IFSC. This will help protect high net worth individuals from inflation and depreciation against the US dollar. This will help in creating a banking ecosystem in GIFT IFSC. Residents can now invest outside India through an FCA account subject to the LRS limit of $250,000 per annum.

At present, remittances to IFSC under LRS can be made only for investing in securities in IFSC (except those issued by entities outside IFSC) and for pursuing certain courses in foreign universities or foreign institutions in IFSC. Fees can be paid for education.

Tapan Ray, MD and Group CEO of GIFT City, said: “This move aligns GIFT IFSC with other global financial centres, allowing resident investors to leverage our platform for a wide range of overseas investments and expenditure. Is.”

He said that by clarifying the use of LRS for investments and enabling transactions like insurance and education loan payments in foreign currency, RBI has significantly enhanced the attractiveness and utility of GIFT IFSC.

“Notably, insurance and bank fixed deposits in foreign currency, which were not allowed earlier, are now enabled for resident Indians. “This move is expected to benefit IFSC banks and open up new opportunities for life insurance companies operating in GIFT IFSCs, thereby enhancing access and flexibility for Indian resident individuals looking for international investment opportunities,” EY India said. said partner Jaiman Patel.

However, it is unclear whether LRS funds can be used to invest in derivatives within IFSC jurisdiction.