RBI Liberalised Remittance Scheme

Current Affairs

  • India has come a long way in liberalizing foreign exchange transactions for its residents. Before 2004, transferring money overseas was a cumbersome procedure involving numerous approvals from the Reserve Bank of India (‘RBI’). The rationale behind these strict regulations was multifold.
  • First, India closely watched its foreign exchange reserves to maintain a comfortable cushion for meeting its debt and interest obligations.
  • Second, it restricted the outflow of money from the country to prevent destabilization and devaluation of the rupee. Third, high imports into the country required funding through foreign exchange reserves.
  • The Liberalised Remittance Scheme (LRS) allows parents to transfer money to their children studying abroad.
  • Any Indian resident can participate in it and transfer up to $250,000 abroad in a financial year.
  • Authorized dealers, such as banks, enable such transactions between residents and their overseas dependents, using only your PAN Card for verification.
  • Besides remittances, LRS can also offer foreign exchange services to Indian citizens for medical expenses or traveling.
  • However, corporates, partnership firms, HUFs, and charitable trusts are not eligible to use the LRS.

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