RBI reveals that outward remittances under the LRS amounted to $2.36 billion during the month, marking a notable decrease from the $3.89 billion reported in June.
Outward remittances by resident individuals under the Reserve Bank of India’s (RBI) liberalized remittance scheme (LRS) saw a substantial decline of 39.36% in July 2023 compared to the previous month. This decline is primarily attributed to a significant reduction in funds sent for the maintenance of close relatives.
Data published in the RBI’s monthly bulletin for July reveals that outward remittances under the LRS amounted to $2.36 billion during the month, marking a notable decrease from the $3.89 billion reported in June. However, it’s noteworthy that this figure remains 19.02% higher than the $1.982 billion remitted in the fiscal year 2022.
The bifurcation
Within the same period, deposits remitted experienced a sharp decrease, falling to $50.12 million from $227.23 million in June. Similarly, investments in equity and debt schemes tapered down to $58.06 million in July, compared to the $314.73 million recorded in the previous month. Additionally, the purchase of immovable assets showed a decline, dropping to $58.06 million in July from $314.73 million in June.
The most significant reduction was observed in funds sent for the maintenance of close relatives, which saw a substantial decline to $282.30 million from $890.89 million.
During the same period under review, contributions to international travel amounted to $1,419.42 million, followed by gifts at $233.96 million. Overseas education and medical treatment accounted for $267.28 million and $4.22 million, respectively.
As per experts, individuals who intended to allocate their funds abroad may have executed these transactions in June, leading to the observed decline in July.
The LRS scheme
In the Union Budget for FY23, the government proposed a significant increase in the tax collected at source on liberalised foreign remittances, raising it from 5% to 20% for amounts exceeding Rs 7 lakh, except for education and medical treatment. Initially scheduled for implementation on July 1, the Ministry of Finance later deferred the revision to October 1.
The LRS scheme, introduced in 2004, allows all resident individuals, including minors, to remit up to $250,000 per financial year for any permissible current or capital account transaction or a combination of both. This scheme, initially introduced with a limit of $25,000, has been periodically revised to align with prevailing macroeconomic conditions.
