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RBI to Tighten LRS Rules on Foreign Deposits

12 June 20251 min read
BANKING & FINANCERBI to Tighten LRSRules on ForeignDeposits12 June 2025safalsetu.com

Why in the news

A Reuters report said RBI will tighten the Liberalised Remittance Scheme to stop passive wealth shifting abroad.

Key facts

  • Planned ban on LRS money for foreign currency fixed deposits and interest-earning accounts abroad.
  • Passive wealth shifting clashes with India’s capital control regime.
  • Limit: $250,000 per resident per financial year.

Concerns

  • Rising remittances may strain forex reserves and rupee stability.
  • RBI wants to block deposits under proxy names and passive remittances via fintech or private bank routes.

Exam angle

  • Allowed purposes include education, travel, medical costs, foreign shares, bonds and property; legitimate investments stay unaffected.

Test yourself

1. What is the annual remittance limit per resident under the Liberalised Remittance Scheme, per the notes?

Residents can remit up to $250,000 per financial year.

2. RBI's planned LRS tightening targets funds used for what?

RBI wants to prohibit LRS funds in foreign currency FDs and similar accounts.

3. Which regulator proposed to amend the LRS guidelines to curb passive capital export?

RBI is planning the changes.

This topic is part of Daily Current Affairs 12 June 2025 (22 topics).

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