RBI hikes overseas remittance limit for residents to $1,25,000

The Reserve Bank of India (RBI) today announced a slew of measures on the foreign exchange front, including a hike in overseas remittance limit by residents and allowed non-residents (except citizens of Pakistan and Bangladesh) to take out Indian currency notes up to Rs25,000 while leaving the country.

RBI said it would separately issue operating guidelines in this regard.

At present, only Indian residents are allowed to take Indian currency notes up to Rs10,000 out of the country. Non-residents visiting India are not permitted to take out any Indian currency notes while leaving the country.

These relaxations on the foreign exchange front have been announced in view of the recent stability on the country's forex reserves, RBI said in its bi-monthly monetary policy today.

Further, with a view to improving the depth and liquidity in the domestic foreign exchange market, the RBI has decided to allow foreign portfolio investors to participate in the domestic exchange traded currency derivatives market to the extent of their underlying exposures plus an additional $10 million. Domestic entities will also be allowed similar access, RBI said.

The RBI has relaxed the eligibility limit for foreign exchange remittances to $1,25,000 from $75,000 at present.

It was earlier possible to remit up to $200,000 under the liberalised remittance scheme before it was reduced to $75,000 last year, as a prudential measure when the country was going through a sudden depreciation of its currency. RBI said the guidelines will be issued shortly.

Since the first bi-monthly monetary policy statement of April 2014, RBI noted that global activity has been evolving at different speeds.

A broad-based strengthening of growth is gaining traction in the US and the UK, after a moderation in the first quarter of 2014 due to adverse weather conditions. However, in the euro area, recovery is struggling to gather momentum. The pick-up in sales in Japan in anticipation of the consumption tax hike has been followed by a sharp fall in consumer spending, RBI said.

Structural constraints continue to impede growth prospects in emerging market economies (EMEs), with concerns about the slowdown in China as its economy rebalances. Financial markets across the world still remain vulnerable to news about the impending normalisation of interest rates in some developed economies, even as some valuations appear frothy.