Mumbai: The Reserve Bank of India (RBI) on Thursday liberalized foreign exchange rules for local residents who want to pass on gifts or enter into certain other transactions with close relatives living overseas.
The limit on gifts of shares and debentures has been doubled to $50,000 (Rs24.5 lakh) from $25,000 a year. They can also pass on rupee gifts of up to $200,000 per fiscal year to close relatives, which is a new provision.
An RBI panel headed by former deputy governor K.J. Udeshi had recommended the central bank remove “the operational impediments and assess the level of efficiency in the functioning of authorized persons, including the infrastructure created by them”, it said in a statement on its website. The panel submitted its report to RBI in August.
Resident individuals can also lend up to $200,000 in a fiscal year. The payment can be made by crossed cheque or electronic transfer, subject to certain conditions. Resident Indians can also repay loans taken by foreign relatives from local banks within the $200,000 limit. Earlier, they were allowed to repay only home loans.
Non-resident Indians (NRIs) can now also become joint account holders with residents in domestic accounts, while residents can join overseas relatives in their foreign non-resident accounts, subject to some conditions.
Residents can also pay the medical expenses of NRI relatives. Earlier, they were only allowed to meet expenses on account of boarding, lodging and services related to these or travel to and from and within India of a person living abroad and visiting the country.
Full convertibility—the free transfer of the rupee—is not allowed by RBI. The rules are relaxed in certain cases such as the purchase of equipment from overseas. RBI has said it will eventually introduce full convertibility of the rupee, but do so incrementally.
According to a currency consultant, who spoke on condition of anonymity, this is one such “baby step”.