Source: The Economic Times.
You now have the option of investing serious money overseas - the kind that would buy 100 shares of Google in Nasdaq. You can also invest in foreign mutual funds or park foreign currency deposits in international banks with no Indian presence. Resident individuals can also gift or donate up to $50,000 in a financial year.
The Reserve Bank of India (RBI) on Wednesday issued a notification that will formalise the liberalised remittance scheme of $50,000 for resident individuals. Till date, a resident individual could invest in overseas companies that are listed on a recognised stock exchange and hold at least 10% stake in a listed Indian enterprise. This meant while Indian investors could buy Unilever shares, they could not invest in stocks like Google or Bank of New York. Now, a resident individual can invest up to $50,000 in any listed foreign company. RBI has also scrapped sub-limits that restricted remittances towards gifts or donations at $5,000. For all remittances, individuals will have to disclose their PAN number and source of funds along with the beneficiary’s name, address and account number. The notification says foreign banks - even those with no branches in India - can sell deposits and other financial services products to residents while Indian banks can act as agents. However, all this is subject to RBI approval. However, not many high net worth Indian investors have been using the $50,000 remittance window to play the overseas stock market. Even transactions like buying properties overseas, which captured common imagination, did not materialise in a big way. Possibly, the only set of investors who have been smartly using this facility are arbitrageurs in commodity futures, who used some international brokers to take positions in global exchanges like Nymex and CBOT. Significantly, even RBI had inhibitions on the move. Every time a new scheme was launched, even if it was a variant of the previous one, banks were required to take fresh permission from the regulator. Besides, there was not much appetite for overseas deposits, which not only fetch a lower return but also carry a currency risk for the Indian investor. Even in the new notification, RBI has retained the scheme-wise approval requirement. However, with this, the central bank has implemented in full the recommendations of the recent report on capital account convertibility for individual remittances in the first phase.
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