Module: | MODULE A: INTERNATIONAL BANKING
Q180: Consider the following statements regarding the Liberalised Remittance Scheme:
1. Under the Liberalised Remittance Scheme, all resident individuals are permitted to freely remit up to 250,000 US Dollars per financial year for permissible transactions.
2. The Liberalised Remittance Scheme facility is also actively available to corporate entities, partnership firms, and trusts for their business operations.
3. Remittances for the purpose of trading in foreign exchange margins or speculative currency trading are strictly prohibited under this scheme.
Which of the statements given above is or are correct?
2. The Liberalised Remittance Scheme facility is also actively available to corporate entities, partnership firms, and trusts for their business operations.
3. Remittances for the purpose of trading in foreign exchange margins or speculative currency trading are strictly prohibited under this scheme.
Which of the statements given above is or are correct?
✅ Correct Answer: C
🎯 Quick Answer:
Option C is correct because only statements 1 and 3 are accurate.Structural Breakdown: The scheme permits remittances up to 250,000 US Dollars per financial year for both current account purposes, such as tourism, medical treatment, or education, and capital account purposes, such as buying foreign shares or property.
Statement 2 is incorrect because the scheme is strictly restricted to resident individuals, including minors; it is not available to corporations, partnership firms, or trusts.
Statement 3 is correct as the central bank forbids using this foreign exchange for speculative trading.
Historical Context: The scheme was introduced in February 2004 with an initial limit of just 25,000 US Dollars and has been progressively increased over the years as India's foreign exchange reserves strengthened.
Causal Reasoning: The central bank excludes corporations from this scheme because corporate foreign exchange requirements are vastly larger and more complex, requiring them to be governed by separate, stricter regulatory frameworks like the External Commercial Borrowing guidelines or Overseas Direct Investment rules.