RBI Restricts Remittance and Overseas Property Buying by Residents

14 August 2013

In a significant move the RBI has capped remittance of resident Indians to US$ 75,000 a financial year instead of the higher US$ 2,00,000. It has also banned residents from purchasing property abroad directly or indirectly.

These come as part of the central bank's desperate measures to contain the present foreign exchange rate fiasco. With this RBI curb the outflow of dollars from India will reduce.

India had liberalized remittances of its residents in 2004 and permitted remittance up to US$ 2 lakhs a year under Liberalised Remittance Scheme for permitted transactions which include purchase of property, shares or debt securities outside India without needing special permission from RBI. With the new restriction, residents will be able to remit maximum US$ 75,000 a year under this scheme and also be barred from buying any immovable property abroad. For genuine requirement above this limit residents can approach RBI for approval.

Gift in rupees or loans offered to NRI close relatives by residents are also subject to the cap of US$ 75,000 a year which approximates to Rs 45 lakhs at the exchange rate of Rs 60 per dollar.

Apart from residents RBI has placed restrictions on foreign investment of businesses. It has tightened regulations on gold import further.

Rupee is depreciating against the dollar due to squeezed supply of dollars. India's imports are ever on the rise and on the other hand institutional investors are pulling back dollars from other markets as US economy revives.

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