What changed
Previously, LRS remittances to IFSCs were not explicitly permitted. Now, resident individuals can remit under LRS to IFSCs for investments in securities (excluding those issued by entities resident outside IFSC) and can open non-interest bearing foreign currency accounts. Idle funds in such accounts must be repatriated to the investor's domestic INR account within 15 days.
What it means for you
Banks must update their LRS processes to allow remittances to IFSCs for eligible investments, ensuring compliance with FEMA rules. This deepens IFSC financial markets and offers residents portfolio diversification, but banks must enforce the 15-day repatriation rule and prohibit domestic transactions between residents via these accounts.
What you must do
- Update internal LRS guidelines to permit remittances to IFSCs for investments in securities (excluding those issued by entities resident outside IFSC).
- Enable resident individuals to open non-interest bearing foreign currency accounts in IFSCs under LRS, with a 15-day repatriation rule for idle funds.
- Ensure no domestic transactions between residents are settled through these IFSC foreign currency accounts.
- Comply with all reporting requirements under the LRS Master Direction and bring circular contents to customers' notice.
Who it affects
Category-I Authorised Dealer Banks, Resident individuals seeking to invest in IFSCs, IFSC entities and financial market participants
Can resident individuals invest in any security in IFSCs under this LRS facility?
No, investments are permitted only in securities issued by entities resident in IFSCs, not those issued by entities/companies resident outside IFSC in India.
What happens if funds in the IFSC foreign currency account remain idle beyond 15 days?
Any idle funds must be immediately repatriated to the investor's domestic INR account in India within 15 days from receipt.
Are AD Category-I banks required to update any existing master directions?
Yes, the Master Direction on LRS is being updated to reflect these changes, and banks must ensure compliance with all terms and reporting requirements.