RBI alters ‘relative’ definition to check outward remittances

RBI alters ‘relative’ definition to check outward remittances

News:

1. RBI has narrowed the definition of ‘relatives’ to check the flow of funds as remittances.

Important facts:

2. The decision was taken keeping in mind the concerned over funds sent abroad under the ‘maintenance of close relative’ category of the Liberalised Remittance Scheme (LRS).
3. The RBI has decided to align the definition of ‘relatives’ with the definition given in Companies Act, 2013 instead of Companies Act, 1956.
4. The funds under this category  now be sent only to immediate relatives such as parents, spouses, children and their spouses.
5. RBI has introduced a system for daily reporting of individual transactions under the LRS by banks.
6. This enables banks to view remittances already made by an individual during the fiscal.
7. The system uses the Permanent Account Number of the remitter to aggregate remitter-wise data.
8. The apex bank has made furnishing of PAN mandatory for such transactions.
9. Reasons

• Outward remittances under maintenance of close relatives increased to almost $ 3 billion in 2017-18 from $ 174 million in 2013-14.
• Funds sent under close relatives have more than doubled since 2015-16.
•  Overall outward remittances under LRS went up to $ 11 billion from $ 1 billion in the same period.