Resident Indians sent close $2 billion abroad in September under the Liberalised Remittances Scheme(LRS), touching a three year high which analysts speculate could be to buy cryptos. More than 60 per cent of the money has remitted is for travel abroad and studies, which again are at multi-year highs, RBI data indicates.
Overall outward remittances under LRS rose 56 per cent during April-September’21 to $8.9 billion compared to $ 5.7 billion in the same period a year ago. The Reserve Bank of India (RBI) allows resident Indians to send abroad up to $250,000 a year per person under the Liberalised Remittance Scheme (LRS) for a number of current account transactions including for overseas travel, studies abroad, maintenance of close relatives , gifts and donations among other . Besides capital account transactions like investment in deposits, equities and bonds, property purchases also fall under LRS.
Analysts speculate that there is a possibility that money remitted under any permissible LRS head, could be subsequently used for any purpose including purchase of cryptos. Experts say that such transactions if any could be in contravention of the law. Combined remittances under capital account transactions- deposits, property purchases and investment in equities and bonds together rose 25 per cent to $765 million during the period, though on a small base.
“The LRS Scheme permits remittance to foreign currency account held overseas, however such funds need to be utilised in compliance with the exchange control regulations.” said Moin Ladha, partner at law firm Khaitan and Co. “There is an ambiguity on treatment of cryptocurrency under these regulations, hence any such transaction using LRS fund held in an overseas foreign currency account needs to be carefully evaluated from a compliance perspective”.
But remittances under two heads- travel and studies abroad almost doubled during the period. While travel spends rose from $1.4 billion to $ 2.4 billion in the first half of FY’22, remittances for study abroad rose from $1.5 billion to $3 billion during the period.
Experts say that a lot of the money spent could be due to release of international travel restrictions due to the pandemic. ” We are seeing an uptick in travel and studies abroad. A lot of pent up demand has come up. United States has opened up, a major travel destination for Indians” said Harsh Kumar Bhanwala, executive chairman of Capital India Finance, which makes outward remittances under the RemitX brand. ” As for studies abroad, a number of students who had opted for online courses last year due to the restrictions imposed by the pandemic are now returning back to campus classes as the universities open for real-time studies”.
From the balance account perspective, the gains made in the previous may not continue on account of the rise in such outflows.