Remittances Current Affairs

RBI tightens reporting norms for Liberalised Remittance Scheme

The Reserve Bank of India (RBI) has tightened reporting norms for the Liberalised Remittance Scheme (LRS) under which individual can transfer up to US $2,50,000 abroad in a year. The purpose of tightening of norms is to improve monitoring and also to ensure compliance with LRS limits.

Key Facts

Currently, the LRS transactions are permitted by banks based on declaration made by remitter. The monitoring of adherence to limit is confined to obtaining such declaration without independent verification, in absence of reliable source of information.

Now under tightened reporting norms, daily reporting system by Authorised Dealer (AD) banks of transactions undertaken by individuals under LRS has been placed, which will be accessible to all the other ADs. It will be mandatory for banks to upload daily transaction-wise information undertaken by them under LRS.

Liberalised Remittance Scheme (LRS)

LRS is facility provided by RBI for all resident individuals including minors to freely remit upto certain amount in terms of US Dollar for current and capital account purposes or combination of both. The scheme was introduced in February 2004 and its regulations are provided under Foreign Exchange Management Act (FEMA), 1999. After it was launched, the LRS limit was US $25,000, but it has been revised in stages consistent with prevailing macro and micro economic conditions. At present, LRS limit for all resident individuals, including minors, is US $2,50,000 (Rs. 1.5 crore) per financial year.

Under LRS, individuals can make remittances for overseas education, travel, medical treatment, maintenance to relatives living abroad, gifting and donations. The remitted money can be used for purchase of shares and property as well. Individuals can also open, maintain and hold foreign currency accounts with overseas banks for carrying out transactions under it.

Restrictions: Under LRS, remittances cannot be used for trading on foreign exchange markets, purchase of Foreign Currency Convertible Bonds issued abroad by Indian companies and margin or margin calls to overseas exchanges and counterparties. Similarly, individuals are not allowed to send money to countries identified as ‘non cooperative jurisdictions’ by Financial Action Task Force (FAFT). It also prohibits remittances to entities identified as posing terrorist risks.

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India world’s largest remittance recipient in 2015: World Bank

As per recently report of World Bank, India remained the world’s largest remittance recipient in 2015.

It was revealed by the World Bank’s annual report Migration and Development Brief. In 2015, India attracted about 69 billion US dollars in remittances, down from 70 billion in 2014

Key Highlights of Report

  • Other large remittance recipients in 2015 were China (64 billion dollars), Philippines (28 billion), Mexico (25 billion) and Nigeria (21 billion dollar).
  • Global scenario: In 2015, global remittances which include those to high-income countries contracted by 1.7% to 581 billion US dollar compared to 592 billion in 2014.
  • Indian scenario: Remittances to India in 2015 decreased by 2.1 per cent to USD 68.9 billion. This marks the first decline in remittances since 2009.
  • Developing countries: Officially recorded remittances to developing countries amounted to 431.6 billion dollars in 2015, an increase of 0.4 per cent over 430 billion dollars in 2014.
  • The growth pace of remittances to developing countries in 2015 was seen as the slowest since the global financial crisis.
  • India’s neighbours: The growth of remittances in 2015 slowed from 8% in 2014 to 2.5% for Bangladesh, from 16.7% to 12.8% for Pakistan, and from 9.6% to 0.5% for Sri Lanka.

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