The outflow of foreign exchange under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI) has bounced back in the first quarter ended June 30, 2021 after a steep fall during the year-ago period when the Covid pandemic hit countries across the world and travel was banned.
With the unlocking and fall in Covid cases in many countries, remittances from India rose to $3.67 billion in the April-June period of 2021-22 as against $1.89 billion a year ago. Under the Liberalised Remittance Scheme of the RBI, all resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year (April–March) for any permissible current or capital account transaction or a combination of both.
Total outward remittances increased to $1.232 billion in June this year, as against $780 million in June last year, according to the latest RBI data. Outflows were $1.188 billion in April and $1.250 billion in May. With Covid becoming a dampener, outward remittances fell by over $six billion to $12.684 billion in fiscal ended March 2021 from $18.76 billion in March 2020.
Currently, residents are allowed to remit money abroad for various purposes like private visits to any country (except Nepal and Bhutan), gift or donation, going abroad for employment, emigration, maintenance of close relatives abroad, travel for business or attending a conference or specialised training or for meeting expenses for meeting medical expenses, check-up abroad, accompanying as attendant to a patient going abroad for medical treatment, expenses in connection with medical treatment abroad and studies abroad.
According to RBI data, outward remittances for studies abroad had shot up from $431 million in April-June 2020-21 to $1.162 billion in April-June of 2021-22. Residents who travelled abroad had remitted $855 million in the first quarter of 2021-22, up from $473 million in the same period a year ago. Similarly, remittances for maintenance of close relatives abroad had increased from $483 million a year ago to $718 million in first quarter of 2021-22.
In fiscal 2020-21, total remittances for travel abroad had plummeted to $3.23 billion from $6.95 billion in 2019-20 as countries cancelled flights and banned entry of travellers. The current indication is that travel abroad is slowly picking up with unlocks announced by many countries. However, many countries including the US, Canada and Australia are yet to allow Indian tourists.
Investments in equity and debt abroad by resident Indians jumped to $170 million in April-June of 2021-22 as against $83 million in the same period of last year. The RBI has not prescribed any ratings or guidelines under LRS of $2,50,000 on the quality of the investment an individual can make. However, the individual investor is expected to exercise due diligence while taking a decision regarding the investments which he or she proposes to make.
The RBI doesn’t allow remittance from India for margins or margin calls to overseas exchanges or overseas counterparty and for purchase of FCCBs issued by Indian companies in the overseas secondary market. Remittance for trading in foreign exchange abroad is also not allowed.
what is LRS?
Under the Liberalised Remittance Scheme of the RBI, all resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year (April-March) for any permissible current or capital account transaction or a combination of both.