Introduction
The Reserve Bank of India (RBI) is responsible for issuing currency, managing foreign exchange and regulating the financial system of the economy. It plays a key role in managing the flow of money in and out of the country. This is because for two reasons:
- The government wants to ensure that the source of such money being sent into or out of the country does not come from crime or end up being used for an illegal purpose
- To protect the local currency market from being destabilized due to the excessive outflow of the rupees.
What is LRS??
The Liberalised Remittance Scheme (LRS), introduced vide AP (Dir Series) Circular number 64, dated February 4, 2004, is one of the steps taken by the government towards easing the controls on foreign exchange movements in and out of the country in the process of liberalisation.
A remittance can be inward (i.e. when the amount comes into India from abroad) and outward (i.e. when the amount is sent from India to abroad). LRS is applicable only for the outward remittances made. This scheme is described as ‘liberalised’ because till the introduction of this scheme, the individuals were allowed to remit the amount abroad subject to compliances under FEM (Current Account Transactions) Rules, 2000 and with specific permission from RBI wherever required.
