New Delhi : Banks have approached the Reserve Bank of India (RBI) seeking integration with its Centralised Information Management System (CIMS) platform, aiming for real-time verification of limit utilisation under the Liberal Remittance Scheme (LRS), said people familiar with the development.
Under the LRS, Indian citizens can remit up to $250,000 per financial year for various permissible transactions.
The move can also fast-track the inclusion of international credit card spending under LRS regulations, the people said.
“This was discussed in an internal meeting last month, and for smooth implementation, a request has been made to the RBI for integration of their systems with CIMS,” a senior bank executive said on condition of anonymity, adding that banks would work closely with the RBI for smooth technological integration.
The RBI launched CIMS last year, its next-generation data warehouse, where banks submit data, including statutory returns.
Queries emailed to the RBI did not elicit any response.
Seamless Compliance
Once implemented, the integration would enable banks to track in realtime and flag once any cardholder breaches the limit, and also ensure seamless remittance of tax collected, said the executive.
While the government removed, through a gazette notification in May, the differential treatment for credit cards vis-à-vis other modes of drawal of foreign exchange under LRS, its full implementation is pending. Earlier this year, the central bank had asked lenders to be ready for reporting of LRS transactions and recovery and remittance of tax collected on source (TCS) on such transactions through international credit cards. In August, it followed up with lenders on issues they were facing regarding its implementation.
Earlier, banks had sought an extension from the regulator to fully calibrate their systems to report such transactions. Later, in September, through the Indian Banks’ Association (IBA), a common standard operating procedure (SOP) was circulated among all lenders for reporting, levying, collecting, and remittance of TCS on transactions under LRS using international credit cards.
In June 2023, the government decided to postpone the implementation of its May 16 e-gazette notification to give banks and card networks adequate time to put in place the requisite IT-based solutions. “This would mean that transactions through international credit cards while being overseas would not be counted as LRS and hence would not be subject to tax collection at source (TCS),” it had said in a statement.
The government had notified Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, vide an egazette notification dated May 16, 2023, to remove the differential treatment for credit cards vis-à-vis other modes of drawal of foreign exchange under LRS.
Later, after discussion with stakeholders, it amended certain provisions, including restoring exemption from TCS to threshold of ?7 lakh per financial year per individual in all categories of LRS payments, through all modes of payment, regardless of the purpose.
