Repatriation limit for NRIs, PIOs hiked to $1 mn a year

MUMBAI: THE Reserve Bank of India (RBI) has hiked the repatriation limit for non-resident Indians (NRIs) and persons of Indian origin (PIOs) from their NRO accounts by over four times, from the present $230,000 per year to $1m a year.
While the decision to hike the repatriation limit has been taken on the strength of an extremely comfortable foreign exchange reserves position of over $70bn, it comes at a time when NRIs, rather than take money out of the country, are remitting money into India to take advantage of huge interest rate differentials.
“Though the relaxation is a step towards full convertibility of the rupee, it is quite unlikely that money is going to flow out of the country on this count. Given the higher returns on Indian investments, NRIs are preferring to keep their money here,” says the treasury head of a private bank. During April-August, ’02, NRI deposits were at $1.4bn, higher by 51% over the previous corresponding period’s $941m.
Under the previous remittance guidelines, NRIs and PIOs were permitted to remit up to $30,000 a year for education, up to $100,000 a year for medical expenses and up to $100,000 a year from sales proceeds of immovable property, held for a period of 10 years. “It has now been decided to remove the present dispensation of permitting different amounts for different purposes,” said the RBI in a circular.
RBI has said the existing prohibition regarding repatriation of assets to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan shall continue.
While the overall cap for overseas investments by mutual funds has been raised from $500m to $1bn, it has now been decided to permit mutual funds to also invest in the equity of overseas companies that have a shareholding of at least 10% in an Indian company listed on a recognised stock exchange in India.
Resident individuals have been permitted to invest in overseas companies that have a shareholding of at least 10% in Indian companies, without any limit. Corporates too can invest in such companies provided their investments do not exceed 25% of their net worth. Following the finance minister’s announcement last Friday of a string of relaxations on foreign exchange control, the RBI has issued circulars elaborating the same. Corporates having overseas offices have been permitted to acquire immovable property outside India for their business and also for staff residential purposes.