RBI on Wednesday (April 26) decided to amend the directions under para 2 (ii) of the A.P. (DIR Series) Circular dated February 16, 2021. As per the revised amendment, Resident Individuals may also open a Foreign Currency Account (FCA) in IFSCs, for making the above permissible investments under Liberalised Remittance Scheme (LRS). Hence, the extant condition of repatriating any funds lying idle in the account for a period up to 15 days from the date of its receipt is withdrawn with immediate effect, which shall now be governed by the provisions of the scheme as contained in the Master Direction on LRS amended from time to time.
The above decision was taken by the Central Bank with a view to deepening the financial markets in International Financial Services Centres (IFSCs) and providing an opportunity for resident individuals to diversify their portfolios. According to the Master Circular of RBI dated February 16, 2021, individuals are permitted to make remittances under LRS to IFSCs set up in India under the Special Economic Zone Act, 2005 subject to the following conditions:
(i) The remittance shall be made only for making investments in IFSCs in securities, other than those issued by entities/companies resident (outside IFSC) in India.
(ii) Resident Individuals may also open a non-interest-bearing Foreign Currency Account (FCA) in IFSCs, for making the above permissible investments under LRS. Any funds lying idle in the account for a period up to 15 days from the date of its receipt into the account shall be immediately repatriated to the domestic INR account of the investor in India. (This condition is withdrawn with immediate effect, as specified above).
(iii) Resident Individuals shall not settle any domestic transactions with other residents through these FCAs held in IFSC.
RBI said that banks should ensure compliance with all other terms and conditions, including reporting requirements prescribed under the scheme while allowing remittances.