Indian residents can now open foreign currency accounts in International Financial Services Centres (IFSCs) like GIFT City which will allow you to hold foreign currency like US Dollars. Earlier, there were limitations on how Indian residents could use the Liberalised Remittance Scheme (LRS) for international transactions.
But the Reserve Bank of India has allowed Indians Resident Indians to open foreign currency accounts (FCA) for sending gifts to friends abroad, buying property abroad, buying insurance, make fixed deposits, education loan payments and for overseas travel.
The foreign currency accounts will be like a bank account in India but instead of rupees, you hold foreign currency like US Dollars. Earlier, LRS remittances to IFSCs were limited but now you can use your foreign currency accounts for a broader range of permissible overseas transactions. These include:
- Gifts: With FCA, you can easily send gifts to friends or family residing overseas.
- Travel: While travelling abroad, FCA can hold foreign currency which can be used to pay for your next travel abroad.
- Overseas Property: You can hold and manage funds in FCA to buy property abroad.
- Foreign Insurance: You can purchase insurance products denominated in foreign currency using FCA.
- Fixed Deposits: You can have foreign currency savings in a fixed deposit (FD) in FCA.
- Study: You can use your FCA to directly pay loan installments in foreign currency.
What are the benefits of the new changes?
Indian residents will get greater flexibility in managing foreign currency holdings and making international transactions. With this, you will also be able to use FCAs for financial services within IFSCs for exploring new investment avenues.
