The Reserve Bank of India has taken fresh measures to suck out excess foreign capital, by allowing resident Indians to open accounts abroad and transfer up to USD 100,000 without seeking its approval under the Liberalised Remittance Scheme (LRS).

This measure follows the restriction imposed by the Central Government on the External Commercial Borrowings (ECBs) to check the rupee’s appreciation. Alongside, the RBI and the Centre have been encouraging overseas investments to flush out excess foreign capital.

Foreign exchange reserves touched USD 229 billion in the week ending August 3, 2007 Resident Indians can remit up to USD 100,000 to acquire assets like property and invest in mutual funds, venture funds, unrated debt securities and promissory notes without going through the RBI route. The Liberalised Remittance Scheme was introduced in 2004 to facilitate overseas investments by resident individuals.

Under the scheme, the RBI permitted upto USD 5000 as gifts and donations. The LRS permits resident Indians to purchase employee stock options of foreign companies if they are not linked to American Depository Receipts and Global Depository Receipts.

For non-resident Indians who have unpaid overseas loans at the time they return to India, the LRS scheme can be used up to the extent of USD 100,000 per financial year.

The scheme does not permit overseas remittance to the following categories:

• Margins and margin calls to overseas stock exchanges.
• Investments in the countries of Bhutan, Nepal, Mauritius and Pakistan
• Remittance to suspect individuals and organisations linked to terrorism
• Lottery, sweepstakes tickets, proscribed magazines and items prohibited under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

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