Many Indian HNIs being asked by foreign banks to shut accounts: Report

Large foreign banks are shutting down the bank accounts of Indian high-net-worth individuals (HNIs) due to the high minimum balance insisted by these banks and the tighter norms by the Reserve Bank of India (RBI), a report by the Economic Times (ET) said on Friday. It added that two British banks, one Swiss bank and a leading Emirates lender have closed the accounts of these Indians in the last two months.

The money was transferred to these banks under the RBI's Liberalised Remittance Scheme (LRS), which allows a person to invest up to $250,000 per year in stocks and properties, among other things. However, some foreign banks have a fixed minimum balance of $1 million. For lesser balance, the banks are also asking the customers to use their wealth management arm to invest in stocks and debt instruments.

"More and more banks are making it clear that they don't want to bear the cost of maintaining accounts with low balances," Moin Ladha, partner of law firm Khaitan & Co. was quoted in the report as saying.

The LRS limit was $200,000 till 2013 when it was slashed to $75,000 per year. Later, in 2015, it was raised to $250,000

On top of that, the RBI has mandated Indian customers to either invest or bring back idle funds within 180 days.

For violations, according to the ET report, the Enforcement Directorate (ED) is allowed to seize the equivalent amount of assets of the customer in India under the Foreign Exchange Management Act (FEMA). The impact of this has been visible in the LRS outflows. In October, the outflows from India under LRS were down 37 per cent.