LRS Curbs: RBI Plans Ban on Overseas Time Deposits
Why in the news
Two government sources said RBI intended to change the LRS so resident Indians cannot park money in foreign time deposits or other interest-earning foreign currency accounts.
Key facts
- Proposal: bar resident individuals from foreign currency time deposits abroad, including routes using alternate names or proxies.
- Thinking: RBI treats such deposits as passive wealth shifting, at odds with India’s controlled capital account regime.
- Aims: protect forex reserves, reduce currency volatility, keep a cautious stance on capital account convertibility.
About the LRS
- Introduced by RBI in 2004 to ease foreign remittances by residents.
- Limit: USD 250,000 per financial year (April-March), no prior RBI approval.
- Permitted uses: travel, overseas education, investments, gifts, donations, medical treatment.
Exam angle
- LRS limit: $250,000 a year. Year of start: 2004.
- Proposed ban: foreign currency time deposits.