Buying a house overseas easier now as RBI doubles NRI investment limit

MUMBAI: Buying a house overseas, which used to be the preserve of the super rich, has now become a lot easier for wealthy Indians with the Reserve Bank of India doubling the foreign exchange remittance limit to $250,000 per individual per year. In other words, a family of four can remit $1 million (equivalent of Rs 6.2 crore) every year to purchase assets overseas.

With this move, the rupee has become almost fully convertible for most Indians. The funds remitted overseas can be used for almost any activity barring a few such as speculation in exchanges, funding terror groups or for remittances to Bhutan, Nepal, Mauritius and Pakistan.

According to Bank of India chairperson VR Iyer, the increase in the liberalized remittance scheme to $2.5 lakh reflects the confidence of the regulator in consistency in foreign inflows.

RBI governor Raghuram Rajan said yesterday that the foreign currency remittance limit was relaxed following a review of the external sector outlook and as a further exercise in macro prudential management. The central bank also said that it will ask the government to subsume under this limit various remittances that an individual is allowed under the Foreign Exchange Management Act, which include donations, gift remittances and exchange facilities for those seeking employment overseas and for maintenance of close relatives abroad. Until now, this facility was in addition to remittance limits already available for private travel, business travel, studies, medical treatment, etc as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000.

An improvement in the country's foreign exchange reserves has emboldened the RBI to increase the limit. Announcing his policy, Rajan said the following the drop in oil prices the current account deficit has been comfortably financed by net capital inflows, mainly in the form of buoyant portfolio flows and supported by foreign direct investment inflows and external commercial borrowings. "Accordingly, there was accretion to India's foreign exchange reserves to the tune of $6.8 billion in Q3," said Rajan.