As the rupee weakens against the dollar, many rich Indians are looking to send money abroad. In such a situation, some big banks are now asking customers for certificates related to the source of funds. In the last one month, at least two major Mumbai-headquartered private banks have told local high net worth individuals (HNIs), NRIs and even a film production company that the source of remittances 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 CAs who are part of the bank’s panel.
Under RBI’s Liberalized Remittance Scheme (LRS), any resident can remit up to $2.5 lakh a year for foreign investment, property purchase, travel or other approved purposes. At the same time, an NRI can take a maximum of $1 million in a year after selling property or assets in India. Additionally, businesses can also pay vendors or service providers abroad, such as remittances for film shoots or hotel expenses.
Increased compliance pressure?
According to tax and foreign exchange expert Rajesh P Shah, RBI rules are clear that only own money can be remitted under LRS. Once the CA issues the certificate, there is no need to ask for a separate certificate of funding source. But banks are asking for additional documents in the name of compliance, due to which the difficulties of the customers are increasing.
Also strict on remittance from NRO account
There are also restrictions on sending money abroad from an NRI’s NRO account. In this account, money earned in India like FD interest, rent, dividend, mutual fund or sale of property is kept. Only legitimate income can be sent from here, not loan money. According to CA Pankaj Bhuta, banks have increased their stringency after a large bank was recently fined. Under RBI rules, it is the responsibility of banks to check whether foreign transfers are as per FEMA rules or not.
There is no restriction on business transfer
However, in case of business, there is no fixed limit for payments to foreign vendors and this can be done from working capital as well. However, many people find it strange to investigate the source of funds even in such cases. As the rupee weakens, wealthier Indians are more willing to send money abroad. In such a scenario, banks have become stricter to avoid compliance, leading to increasing customer woes.