
Outward remittances under the Reserve Bank of India’s (RBI’s) Liberalised Remittance Scheme (LRS) experienced a decline of over 16 percent in May 2024 compared to the same period last year. This decrease is attributed to the base effect. The LRS scheme, introduced in 2004, permits resident individuals to remit up to $250,000 per financial year for permissible current or capital account transactions, or a combination of both, without any charges. Initially, the scheme had a limit of $25,000, which has been progressively increased.
Current Remittance Statistics
According to the latest RBI bulletin, remittances under the LRS stood at $2.42 billion in May 2024, reflecting a 16.18 percent decrease from the previous year. This decline follows a significant increase in remittances recorded in May 2023, which rose by 41 percent year-on-year (Y-o-Y) to $2.88 billion, driven by a proposed increase in tax collection at source (TCS) during the Union Budget for FY23. The TCS was proposed to be raised to 20 percent from 5 percent on amounts exceeding ~7 lakh, excluding education and medical treatment. However, the implementation was deferred to October 1, 2023.
Segment-wise Remittance Trends
In May 2024, remittances for international travel, the largest component, slightly decreased to $1.40 billion from $1.49 billion in the previous year. Remittances for the maintenance of close relatives fell by 34.63 percent to $320.8 million, compared to $490.7 million in May 2023. The ‘gifts’ segment also saw a significant drop of 30.4 percent, totaling $271.9 million.
Remittances for overseas education decreased by 14.7 percent Y-o-Y to $210.9 million, while the ‘deposit’ segment experienced a nearly 47 percent decline, amounting to $52.98 million. Conversely, remittances for medical treatment and the purchase of immovable property increased by 47.59 percent and 2.21 percent, respectively, reaching $7.66 million and $21.69 million.
RBI’s Foreign Currency Transactions
In May 2024, the RBI purchased a net total of $4.22 billion worth of foreign currency. The central bank bought $23.64 billion and sold $19.42 billion in foreign currency during the month. This contrasts with a net sale of $3.64 billion in April. As of May’s end, the RBI’s net outstanding forward sales stood at $10.36 billion, and the headline foreign exchange reserves, excluding the forward book, were recorded at $651 billion.