Reserve Bank Governor Raghuram Rajan Tuesday said the special multi-agency probe, announced by the government to look into all cases of Indians with offshore entities in tax havens, will look into the legitimacy of the accounts of Indians named in the ongoing investigation into The Panama Papers.
“We are obviously part of the investigative team that is going to look into this matter. It is important to note that there are legitimate reasons to have accounts outside,” Rajan said after unveiling the first bi-monthly monetary policy for 2016-17.
“The Liberalised Remittance Scheme (LRS) allows you to take money outside. Yet to see what is legitimate and what is not legitimate. That’s the process of investigation that will take place,” he said.
The Indian Express has published sets of names from the Mossack Fonseca documents on offshore entities as part of its ongoing investigation into the Panama Papers.
RBI Deputy Governor H R Khan said there were two-three issues involved. “Under the Foreign Exchange Management Act, few things are permitted and few are not. So the investigation will reveal what is legitimate,” he said.
The RBI is part of the multi-agency group announced by the government to probe the list which has nearly 500 Indians including celebrities and industrialists.
Under the LRS, all resident individuals, including minors, are allowed to freely remit up to $250,000 every financial year for any permissible current or capital account transaction or a combination of both. While individuals are allowed to buy shares under LRS, the provision does not explicitly allow incorporation of companies by individuals abroad. In August 2013, the RBI allowed individuals to invest in joint ventures and wholly owned subsidiaries through the LRS route too.
As per RBI norms, no Indian citizen could float an overseas entity before 2003 — in 2004, for the first time individuals were allowed to remit funds of up to $25,000 a year under the LRS, and this limit stands at $250,000 a year now.