Opening FCAs at GIFT City now easy for residents

New Delhi: Sending money to foreign countries has become more accessible. All because of GIFT City. The city recently received approval from the Reserve Bank of India (RBI) for foreign currency accounts. Located within an International Financial Services Centre (IFSC), Gift City allows individuals to open foreign currency accounts. This marks a significant development in financial accessibility for Indian residents.

A foreign currency account (FCA) enables account holders to maintain currencies such as the US Dollar or Euro. Providing a straightforward method for depositing earnings earned abroad. Under the Foreign Exchange Management Act, 1999 (FEMA), any Indian citizen classified as a ‘Person Resident in India’ can avail themselves of this opportunity. This type of account is particularly advantageous for those wishing to send funds to friends or family residing overseas, as well as for individuals seeking to secure their foreign earnings conveniently.

Previously, limitations existed on utilizing the Liberalised Remittance Scheme (LRS) for international transactions. However, the recent RBI approval now allows Indian nationals to open FCAs under the LRS framework within Gift City. This regulatory change empowers individuals not only to remit funds abroad but also to engage in activities such as property investments, insurance purchases, educational loan payments, and foreign travel expenses using FCAs.

For instance, someone saving money for a European vacation can now open an FCA in Gift City and directly deposit Euros into the account. This eliminates the need for repeated conversions between Rupees and Euros, shielding them from fluctuations in currency exchange rates. The LRS limit remains applicable, allowing individuals to transact up to $250,000 annually, approximately equivalent to ₹2 crores.

Beyond facilitating international remittances, FCAs serve several other practical purposes:

Gifts:  FCAs enable easy and unrestricted gifting to friends and family abroad.

Travel Funding: Holding foreign currency in FCAs simplifies payment transactions during foreign travel.

Property Acquisition: FCAs streamline funding for purchasing properties overseas.

Fixed Deposits: Foreign currency savings can be parked in fixed deposits within IFSCs, potentially yielding attractive interest rates.

Education Loan Repayments: FCAs facilitate direct installment payments for education loans in foreign currencies, easing the loan repayment process for students studying abroad.

Foreign Wealth Management: Through IFSCs, FCAs offer opportunities to invest in international financial products, diversifying investment portfolios beyond domestic assets.

The introduction of FCAs in GIFT City represents a pivotal step towards enhancing financial inclusivity and flexibility for Indian residents, aligning with global standards in financial services. This development not only simplifies international transactions but also broadens investment horizons and financial management options for individuals across India.