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RBI alters ‘relative’ definition to check outward remittances
News:
- RBI has narrowed the definition of ‘relatives’ to check the flow of funds as remittances.
Important facts:
- 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).
- The RBI has decided to align the definition of ‘relatives’ with the definition given in Companies Act, 2013 instead of Companies Act, 1956.
- The funds under this category now be sent only to immediate relatives such as parents, spouses, children and their spouses.
- RBI has introduced a system for daily reporting of individual transactions under the LRS by banks.
- This enables banks to view remittances already made by an individual during the fiscal.
- The system uses the Permanent Account Number of the remitter to aggregate remitter-wise data.
- The apex bank has made furnishing of PAN mandatory for such transactions.
- 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.
