Why RBI wants to cap select overseas remittances at ₹50 Lakh to save rupees | Explained

The story so far: The Reserve Bank of India (RBI) has reportedly proposed to the Ministry of Finance tightening the limits of the Liberalised Remittance Scheme (LRS), in an attempt likely aimed at preventing a massive outflow of dollars from India. Under the current structure, Indian residents can remit up to $250,000 (over ₹2 crore) in a financial year for purposes such as travel, education, medical treatment, and overseas investments.

The LRS is a scheme under the Foreign Exchange Management Act (FEMA), introduced by the RBI in 2004. It covers both capital account and current account transactions.

Under the capital account, transactions are permitted for opening overseas foreign currency bank accounts, purchasing property, extending interest-free loans of up to one year, and investing in foreign equity, mutual funds, and listed debt securities.