Key Points
Indias wealthy individuals have invested all their surplus foreign remittances in various securities over the last few months to comply with a Reserve Bank of India (RBI) diktat that ended last week...
In August last year, the central bank had issued a circular saying any money that has been remitted overseas by Indian residents and remains unutilised for more than 180 days needs to repatriated back into the country...
Hence, to meet such expenses, many high net-worth individuals (HNIs) have accumulated forex by sending up to $250,000 every year, even when there was no bona fide expense, experts said.. "Post issuance of the overseas investment rules, the Indian HNIs mostly utilized their offshore funds in permitted overseas direct and portfolio investments, including listed equities and liquid funds, within 180 day period" said Prakhar Dua, leader, financial services & regulatory practice, at law firm Nishith Desai Associates...
While some wealthy individuals may have escaped the requirement to repatriate the funds back into India by investing, the whole process could expose the residents to newer risks, market participants said.. Until now, the unutilised funds would mostly be parked in a bank account, which offer minimal risk of capital loss, but now the same money has been invested in securities, which come with a downside risk...
Post the new LRS rules, most Indian residents are investing these in permitted categories and primarily by way of overseas portfolio investment on ultra-short-term regulated funds, particularly because the 180-day period from the date of the circular expired on February 23, 2023, said Moin Ladha, partner at law firm Khaitan & Co..
