Outward remittances under LRS rise 20% to $24.80 billion in 9MFY24

Outward remittances under the Reserve Bank of India’s (RBI’s) Liberalised Remittance Scheme (LRS) surged by 20.22 per cent to $24.80 billion in the April-December period of 2023–24 (FY24), driven by healthy growth across segments.

The outflows under the scheme were mainly driven by the international travel segment, equity and debt investments, maintenance of close relatives, among others.

According to the latest RBI data, the amount remitted under LRS stood at $24.80 billion in the 9-month period ended in December 2023, compared to $20.63 billion in the same period last year.

Outward remittances rose by 7.89 per cent year-on-year (Y-o-Y) in the third quarter of FY24 to $6,457.72 million from the Q3 FY23.

The LRS scheme was introduced in 2004, allowing all resident individuals to remit up to $250,000 per financial year for any permissible current or capital account transaction, or a combination of both, free of charge.

In the initial phase, the scheme was introduced with a limit of $25,000, which was gradually revised.

In the 9-month period of FY24, investments in equity and debt schemes increased to $1,090.91 million, rising 56.48 per cent from $697.13 million in the year-ago period due to the strong performance of international indices.

“Overseas markets have been performing well during this time period and a lot of our investors have been looking to diversify which is likely to have led to an increase in equity and debt investments,” noted Saurabh Bhalerao, Associate Director, BFSI Research, CareEdge Ratings.

Similarly, the remittances made for maintenance of close relatives surged by nearly 29 per cent to $3,684 million whereas the remittances made for purchase of immovable property overseas rose by 49.67 per cent to $183.75 million.

Meanwhile, the largest segment in outward remittance, international travel, grew by 22.74 per cent to $13.40 billion from $10.92 billion in the year-ago period.

“The normalisation of travel patterns and tourism in this year, along with improved investment in foreign assets, have contributed to the surge in outward remittances. In the same time period last year, international travel was impacted by the beginning of the Russia-Ukraine conflict which is likely to have affected travel by Indians. Now, there is a recovery in travel by Indians,” said Sakshi Gupta, principal economist at HDFC Bank.

Following suit, remittances under the gift segment increased by 41.29 per cent to $2,818.12 million in 9M FY24 from $1,994.51 million in the year-ago period and deposits also rose by 13.90 per cent Y-o-Y to $738.12 million in 9M FY24.

Meanwhile, during the Union Budget FY23, the government had proposed raising tax collected at source on liberalised foreign remittances to 20 per cent from the existing 5 per cent on amounts exceeding Rs 7 lakh for all purposes except education and medical treatment. The revision was initially scheduled to be effective from July 1, 2023, but the Ministry of Finance later deferred it to October 1, 2023.

On the other hand, remittances made for studies abroad declined by 13.94 per cent Y-o-Y to $2,585.36 million and donations dropped by 22.29 per cent to $8.54 million.

The overall outward remittances in December 2023 rose by 16.14 per cent to $2,402.07 million from $2,068.26 in December 2022.