In a significant move, the Reserve Bank of India (RBI) has announced that resident individuals can now open Foreign Currency Accounts (FCAs) in International Financial Services Centres (IFSCs) at GIFT City, Gujarat, under the Liberalised Remittance Scheme (LRS). This decision, conveyed in a notification on Wednesday evening, expands the scope of LRS to include remittances for a wider array of permissible purposes within IFSCs.
Previously, LRS remittances to IFSCs were restricted to investments in IFSC securities and payment of education fees to foreign universities or institutions located in IFSCs. With this new directive, residents can now utilize FCAs in IFSCs for all permissible financial services and products as per the International Financial Services Centres Authority Act, 2019. Additionally, this includes all current or capital account transactions in other foreign jurisdictions through FCAs held in IFSCs.
The RBI emphasized that authorised persons, such as banks and designated foreign exchange dealers, are responsible for facilitating these remittances and informing their customers about the new provisions. This measure aims to enhance the functionality and appeal of GIFT IFSC by enabling resident investors to leverage its platform for a broader range of overseas investments and expenditures, including transactions like insurance and education loan payments in foreign currency.
Tapan Ray, Managing Director and Group CEO of GIFT City, welcomed the RBI’s decision, stating, “We at GIFT IFSC welcome the Reserve Bank of India’s recent circular expanding the scope of the Liberalised Remittance Scheme (LRS). This decisive move aligns GIFT IFSC with other global financial centers, allowing resident investors to leverage our platform for a wider range of overseas investments and expenditures.”
The RBI’s notification clarified that these directions are issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, and must comply with any other required permissions or approvals under relevant laws. This development is seen as a strategic step to position GIFT IFSC as a competitive global financial hub, offering enhanced utility and attractiveness for resident individuals seeking to make foreign currency transactions.
Companies Benefited from this RBI Notification
The following companies are likely to benefit from the RBI’s decision to allow resident individuals to open Foreign Currency Accounts (FCAs) in IFSCs at GIFT City:
- L&T Infrastructure Development Projects Ltd.
- Reason: As a major player in infrastructure development, L&T IDPL will benefit from increased investments and financial activities in GIFT City, leading to more projects and higher demand for their services.
- Note L&T Infrastructure Development Projects Ltd. Is part of L&T Group its L&T Finance (LTF) and L&T Technology Ser (LTTS) listed so, ultimately these sister companies will benefited.
- Gujarat International Finance Tec-City Co. Ltd.
- Reason: Being the main developer of GIFT City, GIFTCL stands to gain from enhanced financial transactions and the establishment of FCAs, which will drive the growth and development of the city, attracting more businesses and investors.
- Fairwood Consultants Pvt. Ltd.
- Reason: Fairwood Consultants, involved in providing consultancy and project management services, will see increased demand for their expertise as more infrastructure projects and financial services developments take place in GIFT City.
- Yes Bank (YESBANK)
- Reason: Yes Bank, with its focus on digital banking and financial products, will benefit from the increased demand for foreign currency accounts and related services, driving growth in its international banking operations.
These companies play a significant role in the development and management of GIFT City and are well-positioned to leverage the increased financial activity driven by this regulatory change.