Indian residents sent close to $1 billion abroad in May 2018 under the Liberalised Remittance Scheme (LRS) to meet expenses for travel, studies abroad and maintenance of close relatives etc.
In the same month last year, they had sent $847 million, according to Reserve Bank of India data.
A look at the pattern of spending in May 2018 shows that out of $996 million, over $364 million went for travel, followed by $248.8 million for maintenance of close relatives and $178 million for education. Gifting came fourth at $118 million and fifth was towards making deposits at $ 31 million.
Under LRS, all resident individuals, including minors, are allowed to freely transfer up to a quarter million dollars per financial year for any permissible current or capital account transaction or a combination of both.
The scheme was introduced in February 2004 with a limit of $25,000. The LRS limit has been revised in stages consistent with prevailing macro and microeconomic conditions.
In April 2018, RBI amended rules for tracking transactions under the remittance scheme. Under the new regime- authorised dealers (AD banks) have to provide daily reports on the LRS transactions. These reports are accessible to all the other AD banks. This was done to improve monitoring and also to ensure compliance with the LRS limits.
Earlier, transactions under the Liberalised Remittance Scheme (LRS) were permitted by AD banks based on the declaration made by the remitter. The monitoring of adherence to the limit was confined to obtaining a declaration without independent verification as there was no reliable source of information.
In June 2018, RBI made it mandatory for the remitter to furnish her Permanent Account Number (PAN) for an LRS transaction. PAN is used as a unique identifier to collect remitter-wise data. Earlier, giving PAN was not insisted upon while conducting permissible current account transactions of up to $25,000.