Foreign exchange outflows under the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI) are back in the first quarter ended June 30, 2021, after a steep decline during the year-ago period when the covid pandemic- hit countries Were. Further travel around the world was banned.
With Covid cases opening up and declining in many countries, remittances from India rose to $3.67 billion in the April-June period of 2021-22, compared to $1.89 billion a year ago. Under the Reserve Bank of India’s liberalized remittance scheme, all resident individuals, including minors, are allowed to freely remit up to $250,000 per fiscal year (April-March) for any permissible current or capital account transaction or a combination of both .
According to the latest RBI data, total outward remittances rose to $1.232 billion in June this year from $78 million in June last year. Outflows were $1.188 billion in April and $1.250 billion in May. With the covid dampening in the fiscal year ended March 2021, outward remittances fell by $6 billion to $12.684 billion, from $18.76 billion in March 2020.
At present, residents are allowed to visit any country (except Nepal and Bhutan) for various purposes such as personal visits, gifts or donations, going abroad for employment, emigration, maintenance of close relatives abroad, traveling for business or attending conferences. For sending money abroad is allowed. To meet the expenses for special training or medical expenses, check-up abroad, as attendant of a patient going abroad for medical treatment, expenditure in connection with medical treatment abroad and study abroad.
According to RBI data, outward remittances for studies abroad increased from $431 million in April-June 2020-21 to $1.162 billion in April-June of 2021-22. Residents traveling abroad 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 increased from $483 million a year ago to $718 million in the first quarter of 2021-22.
In fiscal year 2020-21, total remittances for foreign travel declined to $3.23 billion from $6.95 billion in 2019-20 as countries canceled flights and banned entry of passengers. Current indications are that foreign travel is gradually increasing with the unlock announced by many countries. However, many countries including the US, Canada and Australia have not yet allowed Indian tourists.
Investment in equities and debt abroad by resident Indians increased to $170 million in April-June of 2021-22 as against $83 million in the same period last year. The Reserve Bank of India has not prescribed any ratings or guidelines on the quality of investments an individual can make under an LRS of $2,50,000. However, the individual investor is expected to exercise due diligence in making a decision regarding the investment that he proposes to make.
Reserve Bank of India does not allow remittances from India for margin or margin calls to foreign exchanges or foreign counterparties and for purchase of FCCBs issued by Indian companies in the overseas secondary market. Remittances are also not allowed for trading in foreign exchange abroad.
What is LRS?
Under the RBI’s liberalized remittance scheme, all resident individuals, including minors, are allowed to freely remit up to $250,000 per fiscal year (April-March) for any permissible current or capital account transaction or a combination of both.