The Reserve Standard bank of India (RBI) has tightened reporting norms for the Liberalized Remittance System (LRS) under which individual can transfer up to US $2,50,000 abroad in a year. The goal of tightening of norms is to boost monitoring and to ensure conformity with LRS limitations.
The LRS transactions are currently permitted by banks based on the declaration made by the remitter.
The monitoring of adherence to the limit is confined to obtaining such a declaration without independent verification, in the absence of a reliable source of information.
In order to improve monitoring and also to ensure compliance with the LRS limits, it has been made a decision to put in place a daily reporting system by AD banks of transactions undertaken by individuals under LRS, which will be accessible to all the other ADs
Now banks will be required to upload daily transaction-wise information undertaken by them under LRS.
The move is aimed at improving the monitoring and ensuring compliance with the LRS ceilings.
Indians were currently allowed to invest overseas $250,000 a season per person.
This will enable the authorised dealer banks to view the remittances already sent by an individual before allowing further remittance, thus obviating the likelihood of a remitter breaching the LRS limit by approaching multiple authorised dealer banks.
Significance of Liberalised Remittance Scheme (LRS)
- The scheme was introduced on February 4, 2004, with a limit of USD 25,000.
- LRS or Liberalised Remittance System is service provided by RBI for many citizen individuals including minors to freely remit upto specific amount in conditions of US Dollar for current and capital accounts purposes or mixture of both.
- Under LRS, individuals can make remittances for overseas education, travel, treatment, maintenance to family members living abroad, gifting and donations.
- The remitted money can be utilized for sale of stocks and property as well. Individuals can also open up, maintain and keep forex accounts with abroad banks to carry out transactions under it.
- Under the LRS, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year for any permissible current or capital account transaction or a combination of both.
- Individuals can avail of foreign exchange facility for the purposes within the limit of USD 2,50,000 only.