News Excerpt:
The RBI will permit opening of rupee (INR) accounts outside India by persons resident outside India (PROIs) as part of the 2024-25 agenda for internationalisation of the domestic currency.
More detail about news:
- With emphasis on continuous synchronisation of the FEMA operating framework with the evolving macroeconomic environment, rationalisation of various guidelines will be of primary focus.
- RBI has finalised a strategic action plan for 2024-25 and envisaged liberalisation of External Commercial Borrowing (ECB) framework and 'Go-live' for phase I of Software Platform for ECBs and Trade Credits Reporting and Approval (SPECTRA) project.
- Rationalisation of the Liberalised Remittance Scheme (LRS) and review of the International Financial Services Centres (IFSC) regulations under FEMA also are part of the agenda for the current financial year.
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Foreign Exchange Management Act – FEMA
- FEMA was introduced in 1999 to replace an earlier act named FERA (Foreign Exchange Regulation Act).
Objectives of FEMA
- The main objective of this act was to facilitate external trade and payments.
- It was formulated to assist orderly development and maintenance of the Indian forex market.
- It outlines the formalities and procedures for the dealings of all foreign exchange transactions in India.
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Liberalised Remittance Scheme (LRS)
- Before 2004, the act of fund transfer from India to other countries came with severe restrictions under the Foreign Exchange Management Act of 1999.
- Thus, RBI introduced the LRS in 2004 to facilitate smooth foreign transactions.
- It is a foreign exchange policy initiative introduced by the RBI to simplify and streamline the process of remitting funds outside India.
- Under the LRS, a resident individual can remit up to USD 250,000 per financial year for permissible transactions.
- The LRS limit for education, medical treatment, employment, emigration, travel, investment, etc., is the same as mentioned.
- However, one can not use the remittances for margin trading, buying lottery tickets, real estate, etc.
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