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RBI Expands Liberalized Remittance Scheme for IFSCs Like GIFT City

The Reserve Bank of India (RBI) has announced a significant expansion of the Liberalized Remittance Scheme (LRS) specifically for International Financial Services Centers (IFSCs) such as GIFT City in Gujarat. This development enables resident individuals in India to open Foreign Currency Accounts (FCAs) at IFSCs and use them for a broader range of financial activities than previously allowed.

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Key Changes Introduced by RBI:Benefits of the Expansion:

Key Changes Introduced by RBI:

  1. Expanded Permissible Purposes:
    • Resident individuals can now use their FCAs at IFSCs for all purposes permitted under the LRS framework, significantly broadening the scope beyond the earlier restrictions.
    • Previously, LRS remittances to IFSCs were confined to specific uses like investments in securities (excluding those issued by Indian entities) and payment of education fees to foreign universities within the IFSC.
  2. Current and Capital Account Transactions:
    • The RBI now permits both current and capital account transactions in any foreign jurisdiction through an FCA held at an IFSC. This broadens the potential uses of these accounts, offering greater flexibility for international financial activities.
  3. Streamlined Implementation:
    • Transactions will be managed by Authorized Persons, such as banks and authorized forex dealers, ensuring that all activities are routed through the formal banking system, which helps in maintaining transparency and regulatory compliance.

Benefits of the Expansion:

  • Increased Investment Options:
    • This move opens up more investment opportunities for resident Indians, enabling them to participate in a wider variety of overseas markets through IFSCs.
  • Enhanced Flexibility:
    • Individuals now have the flexibility to use their FCAs for various financial activities beyond the previously allowed purposes, such as broader overseas investments and expenditures.
  • Alignment with Global Standards:
    • By allowing these expanded uses, IFSCs in India, such as GIFT City, are brought closer in line with other international financial centers, making them more attractive to resident investors.
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