bank compliance
With the rupee weakening against the dollar, many rich Indians are considering sending money abroad. In such a situation, some big banks are now asking for certificates related to the source of funds from the customers. In the last one month, at least two large Mumbai-headquartered private banks have asked local high net worth individuals (HNIs), NRIs and even a film production company that the source of money being sent abroad should be certified by a Chartered Accountant (CA). Not only this, some banks are also saying that this certificate should be obtained only from those CAs who are included in the bank’s panel.
Under the Liberalized Remittance Scheme (LRS) of RBI, any resident person can send up to $ 2.5 lakh in a year for foreign investment, purchase of property, travel or other approved purposes. At the same time, NRIs can take out a maximum of 10 lakh dollars in a year after selling property or asset in India. Additionally, businesses can also make payments to vendors or service providers abroad, such as sending money for film shoots or hotel expenses.
Increased compliance pressure?
According to Rajesh P Shah, an expert in tax and foreign exchange matters, it is clear in the RBI rules that only one’s own money can be sent under LRS. Once the CA gives the certificate, there should be no need to ask for a separate certificate of source of funds. But banks are asking for additional documents in the name of compliance, due to which the problems of the customers are increasing.
Strictness even on sending money from NRO account
There are also restrictions on sending money abroad from NRI’s NRO account. In this account, the money earned in India like FD interest, rent, dividend, mutual fund or sale of property is kept. Only legitimate income can be sent out from here, not loan money. According to CA Pankaj Bhuta, after a big bank was recently fined, banks have increased their strictness. Under RBI rules, it is the responsibility of banks to check whether foreign transfers are as per FEMA rules or not.
No ban on business transfer
However, in case of business, there is no fixed limit on payment to foreign vendors and this can also be done from working capital. Still, many people find it strange to check the fund source even in such cases. With the weakening of the rupee, the desire to send money abroad has increased among rich Indians. In such a situation, banks have become more strict in order to avoid compliance, due to which the problems of the customers are increasing.