Edited by Deepali Verma
Owing to the policy of high minimum balance and the stricter regulations by the Reserve Bank of India or RBI, large foreign banks are closing down the bank accounts of Indian high-net-worth individuals (HNIs), stated a report by the Economic Times on December 29. Additionally, one Swiss bank, two British banks and a prominent Emirates lender have discontinued the accounts of these Indians in the recent two months.
The transfer of money to these banks took place under the RBI’s Liberalised Remittance Scheme (LRS), allowing a person to invest up to $250,000 per year in stocks and properties, among other things. Some foreign banks have a fixed minimum balance of $1 million. Sometimes for lesser balance, the banks are asking the customers to use their wealth management arm to invest in stocks and debt instruments.
“More and more banks are explicit about not wanting 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 before it was slashed to $75,000 per year stood at $200,000 till 2013. Later, in 2015, it was raised to $250,000. To top that, the RBI has made it mandatory for Bharatiya customers to either invest or bring back idle funds within 180 days.
In case of violations, according to the ET report, the Enforcement Directorate (ED) is permitted to seize the equivalent amount of assets of the customer in Bharat under the Foreign Exchange Management Act (FEMA). The impact of this was visible in the LRS outflows where October 2023 reported the LRS outflow being down by 37 per cent.
