When the then Reserve Bank of India (RBI) governor Raghuram Rajan announced amendments to the Liberalised Remittance Scheme (LRS) in February 2015 and raised the limits of on individual overseas investment, several well-heeled Indian rushed to invest in stocks and properties abroad before the financial year was out.
After Rajan's policy statement, that annual LRS limit (per individual) was revised from USD 125,000 to USD 250,000.
RBI departments typically come out with supportive circulars within a few days, sometimes even on the same day of the monetary policy announcement. But in this case, as the ET report points out, the central bank took an unusually long time in releasing the notification on LRS limit in May.
A few individuals who took advantage of the scheme before March 31, along with at least two large banks that handled cross-border fund transfers, are being investigated by the Enforcement Directorate, as per the report.
The Enforcement Directorate has reportedly told these individuals that they had overstepped investment limit under the liberalised remittance scheme.
LRS was introduced in 2004 to allow Indians buy stocks and properties abroad. The scheme, however, cannot be used to take pure speculative bets on instruments.
If convicted under the Penalty on Foreign Exchange Management Act, the fine could be as high as three times the amount.