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Financial Awareness for RBI Grade ‘B’ Officer Exam: ‘Liberalised Remittance Scheme’

Aug 23, 2016 18:03 IST

    It is observed that in banking examinations, terms with special reference to Banking are regularly asked. These terms are useful for written examination as well as interview of almost every banking examination.  Aspirants are advised to read current news related banking industry on regular basis to enhance their overall general knowledge.

    Here the banking team of Jagran josh is providing brief information on Liberalised Remittance Scheme. The term is important for RBI Grade B exam, IBPS PO Mains exam, BOB recruitment exam through Post Graduate Certificate in Banking and Finance course and other banking exams.

    What is the Liberalised Remittance Scheme (LRS)?

    Under the Liberalised Remittance Scheme (LRS), all resident individuals, including minors, are allowed to freely remit up to USD 2, 50,000 per financial year i.e. April to March for any permissible current or capital account transaction or a combination of both.

    Liberalised Remittance Scheme was introduced in 2004 as a liberalization measure to facilitate resident individuals in remitting funds abroad for permitted current or capital account transactions or combination of both. These Regulations are amended from time to time to incorporate the changes in the regulatory framework and published through amendment notifications.

    Important of LRS:

    The LRS represents India’s first steps towards dismantling controls on foreign exchange movements in and out of the country. It has allowed large numbers of Indians to study abroad and diversify their portfolios.

    Benefits of LRS:

         I. Remit money across the border

    LRS is a window provided by the government of India to remit money across the border, without seeking specific approval.

        II. LRS not available to corporates, trusts

    The scheme is available to all resident individuals, including minors. The scheme is not available to corporates, partnership firms, HUF and trusts.

       III. Where you can avail Remittances

    Remittances are permitted for overseas education, travel, medical treatment and purchase of shares and property, apart from maintenance of relatives living abroad, gifting and donations.

        IV. Where you can't avail Remittances

    Remittances are NOT permitted for trading on the forex markets, margin to overseas exchanges and counterparties and the purchase of FCCB issued by Indian companies abroad.

    Largest users of the LRS:

    Parents who have sent their wards abroad for studies are the largest users of the LRS, using this window both to pay the fees and regularly meet the student’s living expenses.

    For investors, LRS has meant a chance to buy up a piece of property in London or New York (provided you can manage it through installments within the limit specified). People who made use of the LRS window to invest in US-listed stocks in 2008 would have made much better returns over the next five years than those who put faith in Indian stocks.

    The LRS gives you the freedom to put your money to work anywhere in the world. Until India is ready to free all capital controls, the LRS remains the most viable way for individuals to legally remit money overseas.

    Are there any restrictions on the frequency of the remittance?

     There are no restrictions on the frequency of remittances under LRS. However, the total amount of foreign exchange purchased from or remitted through, all sources in India during a financial year should be within the cumulative limit of USD 2, 50,000.

    Can remittances be made only in US Dollars?

    The remittances can be made in any freely convertible foreign currency.

    Are intermediaries expected to seek specific approval for making overseas investments available to clients?

    Banks including those not having operational presence in India are required to obtain prior approval from Reserve Bank of India for soliciting deposits for their foreign/overseas branches.

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