Total outward remittances, under the RBI’s Liberalised Remittance Scheme, shot up to an all-time high of $19.610 billion in the year ended March 2022.
Resident Indians or people resident in India are allowed to transfer foreign currency under the foreign exchange regulations.
The transfer of foreign currency outside India is governed by the Foreign Exchange Management Act, 1999 (FEMA).
Hence, to regulate transferring of funds within a specified limit, RBI brought the LRS.
About the ‘Liberalised Remittance Scheme’ –
Liberalised Remittance Scheme (LRS) was brought out by the RBI in 2004.
It allows resident individuals to remit a certain amount of money during a financial year to another country for investment and expenditure.
According to the prevailing regulations, resident individuals may remit up to $250,000 per financial year.
This money can be used to pay expenses related to travelling (private or for business), medical treatment, studying, gifts and donations, maintenance of close relatives and so on.
Apart from this, the remitted amount can also be invested in shares, debt instruments, and be used to buy immovable properties in overseas market. Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.
LRS restricts –
Buying and selling of foreign exchange abroad, or purchase of lottery tickets or sweep stakes, proscribed magazines and so on,
Any items that is restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
Also, one cannot make remittances directly or indirectly to countries identified by the Financial Action Task Force as non-co-operative countries and territories.