With
this move, the rupee has become almost fully convertible for most Indians.
The funds remitted overseas can be used for almost any activity barring a few
such as speculation in exchanges, funding terror groups or for remittances to Bhutan,Nepal, Mauritius and
Pakistan.
According to Bank
of India chairperson V
R Iyer, the increase in the liberalized remittance scheme to $2.5 lakh
reflects the confidence of the regulator in consistency in foreign inflows.
RBI governor
Raghuram Rajan said on Tuesday the foreign currency remittance limit was
relaxed following a review of the external sector outlook and as a further
exercise in macro prudential management.
The central bank also said that it
will ask the government to subsume under this limit various remittances that an
individual is allowed under the Foreign Exchange Management Act, which include
donations, gift remittances and exchange facilities for those seeking
employment overseas and for maintenance of close relatives abroad.
Until now, this facility was in
addition to remittance limits already available for private travel, business
travel, studies, medical treatment, etc as described in Schedule III of Foreign
Exchange Management (Current Account Transactions) Rules, 2000.
An improvement in
the country’s foreign exchange reserves has emboldened the RBI to increase the limit.
Announcing his policy, Rajan said the following the drop in oil prices the
current account deficit has been comfortably financed by net capital inflows,
mainly in the form of buoyant portfolio flows and supported by foreign direct
investment inflows and external commercial borrowings. “Accordingly, there was
accretion to India’s foreign exchange reserves to the tune of $6.8 billion in
Q3,” said Rajan. Source: Times of India; 04 Feb, 2015
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