RBI decision to allow Indian citizens to open foreign currency account in International Financial Service Centre at Gujarat International Finance Tech-city (GIFT) City in Gujarat will facilitate investment in overseas markets and other expenses overseas besides easing payment of fees for education to foreign universities.
An IFSC is a jurisdiction where business is done in foreign currency and is treated as an international financial hub for all regulatory purposes.
The move comes as a major relief at a time when mutual funds investment in overseas equities are frozen after hitting the cap of $8 billion (including $1 billion for overseas ETFs). The MF industry has been knocking at the doors of RBI to enhance the limit which was fixed in 2007-08.
Currently, Indian residents can open foreign currency accounts in IFSCs for limited purposes, such as investing in securities in the IFSC and paying fees to foreign universities or institutions located there. They were not allowed to transfer funds to stock brokers, banks or other entities in IFSCs for making investments abroad.
The RBI’s recent decision to allow Indian residents to open Foreign Currency Accounts (FCA) at GIFT City allows individuals to manage up to $250,000 annually for international transactions without prior RBI approval.
Viram Shah, CEO, Vested Finance, said by opening foreign currency account in GIFT city, individuals will be able to keep their funds in the Indian financial system while still participating in global financial activities.
It can be a positive step for high net worth Individuals who currently tend to open accounts in financial hubs such as Dubai and Singapore.
Progressive step
Moreover, he said the move is a progressive measure towards achieving full convertibility of the Indian rupee and establishing it as a truly global currency.
Nirbhay Vassa, Whole Time Director and CFO, Abans Holdings, said the recent RBI notification allows citizens to conduct current or capital account transactions in any foreign jurisdiction using a foreign currency account held in the IFSC.
This aligns IFSCs with other international financial centres, enhancing their global competitiveness, said Vassa.
Nikunj Saraf, Vice President, Choice Wealth said the foreign currency account empowers investors to tailor investments to their preferences including stocks, bonds or other foreign assets.
With restrictions on mutual funds’ overseas investments, foreign currency account offers investors greater autonomy in diversifying their portfolios globally, he said
RBI’s decision opens up new avenues for Indian investors, promoting financial inclusion and facilitating broader global investment opportunities, he added.
