Resident individuals may get to transfer money to London with the same ease as transferring money to Patna, and they could include non-resident close relatives as joint holders in their resident bank accounts, as per the suggestions of an RBI committee.
The report of the RBI's ‘Committee to review the facilities for individuals under the Foreign Exchange Management Act, 1999' has pushed for hassle-free current account foreign exchange transactions by resident individuals.
The report seeks to rationalise and streamline existing FEMA instructions and procedures with the twin objectives of being in harmony with the existing capital account convertibility and the move toward fuller capital account convertibility.
Resident individuals should be able to undertake any current account transaction up to $0.2 million a financial year on the basis of a simple application form without banks insisting on any documentary evidence or a chartered accountant's certificate, the committee said.
Gift
Since a resident individual can remit up to $0.2 million a financial year under the liberalised remittance scheme, there is every reason to permit residents to gift or bear the medical expenses of NRIs/PIOs (Persons of Indian Origin) in rupees freely in India without the fear of having contravened FEMA, the committee said.
According to the committee, general permission may be made available to resident individuals to gift shares/securities/convertible debentures to their NRI/PIO close relative.
The gift is however, subject to the NRI/PIO donee being ‘eligible to hold such a security and the value of the security to be transferred by the donor together with any security transferred to any person residing outside India as gift in the calendar year does not exceed $0.2 million.
Joint accounts, loans
Resident individuals could be permitted to include non-resident close relative(s) as a joint-holder(s) in their resident bank accounts. The opening of joint Foreign Currency Non-Resident/Non-Resident External account with a resident could be permitted.
Further, FCNR(B) accounts may be permitted to be opened in any freely convertible currency.
At present, the FCNR(B) scheme is available in only six currencies — the US dollar, pound, euro, Canadian dollar, Australian dollar and Japanese yen.
Banks may sanction rupee loans in India or foreign currency loan outside India to either the accountholder or third-party to the extent of the balance in the NRE/FCNR(B) account subject to margin requirements.
Sale proceeds of FDI investments could be permitted to be credited to NRE/FCNR accounts.
Resident individuals may be granted general permission to lend in rupees to their close relative for any personal purpose or business activities other than agricultural/ plantation activities or real-estate or re-lending business.
They may be also be granted general permission to repay loans taken from banks in rupees in India by their close relatives.
Acquiring shares
The committee has recommended that general permission could be granted to resident individuals to acquire ‘qualification shares' of an overseas company for holding the post of a director without the existing limitations.
Currently, FEMA prohibits a resident from remitting more than $20,000 per annum for acquiring qualification shares for holding the post of a director in companies abroad.