RBI allows resident Indians to open foreign currency accounts in GIFT City

The Reserve Bank of India (RBI) has expanded the scope of remittances to International Financial Services Centres (IFSCs) under the Liberalised Remittance Scheme (LRS) allowing Indian residents to open foreign currency accounts in Gujarat International Finance Tec-City (GIFT City).

On Wednesday, RBI decided to allow authorised persons to facilitate remittances for availing financial services or financial products as per the International Financial Services Centres Authority Act, 2019 within IFSCs.

The apex bank also permitted all current or capital account transactions, in any other foreign jurisdiction (other than IFSCs) through an Foreign Currency Account (FCA) held in IFSCs.

For these permissible purposes, resident individuals can open Foreign Currency Account (FCA) in IFSCs, RBI said in a release.

At present, remittances under LRS to IFSCs can be made only for making investments in IFSCs in securities except those issued by entities/ companies resident in India (outside IFSC) and payment of fees for education to foreign universities or foreign institutions in IFSCs for pursuing certain courses.

The latest move by the central bank will allow resident Indians to open a fixed deposit in foreign currency like dollars in a bank account in GIFT City. This is likely to provides greater flexibility for Indian residents to manage their foreign exchange transactions and facilitate seamless remittances.

“This decisive move aligns GIFT IFSC with other global financial centers, allowing resident investors to leverage our platform for a wider range of overseas investments and expenditures. By clarifying the use of LRS for investments and enabling transactions like insurance and education loan payments in foreign currency, the RBI has significantly enhanced the attractiveness and utility of GIFT IFSC,” said Tapan Ray, MD and Group CEO, GIFT City.

According to Narinder Wadhwa, Managing Director of SKI Capital Services, the RBI’s decision will bolster GIFT City’s status as an international financial hub, attracting more global financial players and boosting overall economic activity in the region.

He believes by simplifying the process and enhancing the financial infrastructure, GIFT City can attract more foreign investments, which can contribute to economic growth and job creation.

“This move can lead to the development of sophisticated financial products and services tailored for both domestic and international markets, leveraging GIFT City’s regulatory advantages. By allowing a broader range of remittances, the RBI is promoting financial inclusion, enabling a larger section of the population to participate in global financial markets,” Wadhwa said.

Meanwhile, by opening accounts in GIFT city, Indian individuals will be able to keep their funds within the Indian financial system while still participating in global financial activities, noted Viram Shah, the Co-founder & CEO of Vested Finance.

“This development is seen as a positive step, especially for High Net Worth Individuals (HNIs) who currently tend to open accounts in financial hubs like Dubai and Singapore. Furthermore, this announcement is viewed as a progressive measure towards achieving full convertibility of the Indian rupee and establishing it as a truly global currency,” Shah said.