Banks in Zurich, Singapore, and London are becoming increasingly cautious about issuing or renewing offshore credit cards for Indian residents due to the RBI’s 180-day remittance rule, impacting wealthy individuals and minors alike.
Some offshore banks in financial centres including Zurich, Singapore and London are becoming more cautious about issuing or renewing international credit cards for Indian residents, as a 2022 Reserve Bank of India rule on overseas remittances starts to bite. According to India Today, the issue is affecting cards that have expired or are due for renewal, even where the customer’s credit profile has not changed.
At the centre of the problem is the Liberalised Remittance Scheme, which allows resident Indians to send up to $250,000 abroad each year for permitted purposes. Under the RBI’s 180-day redeployment condition, money transferred overseas must be spent or invested within six months or returned to India. Simply leaving funds in a foreign current or savings account, or even placing them in a fixed deposit, does not satisfy the rule, according to the report. Legal summaries of the framework say the requirement can make it hard for residents to maintain the balances that overseas banks often expect.
That has awkward consequences for wealthy Indians who use foreign-issued cards to pay in the same currency in which they spend. Lawyers quoted by The Economic Times said the cards can be attractive because they may avoid foreign-exchange conversion costs and, in some cases, sit outside the tax collected at source framework that applies to certain LRS transactions. But the same structure depends on a broader banking relationship, and the 180-day rule can make that relationship less practical for banks that want customers to keep idle money abroad.
The issue is also reaching minors with overseas accounts. India Today reported that some banks are questioning whether those accounts should remain open, because children have fewer obvious ways to deploy remitted funds within the prescribed period. One tax adviser told The Economic Times that a degree of flexibility could ease the strain without weakening the purpose of the rule, although another practitioner said the position on minors has not changed since the LRS began in 2004.
For resident Indians, the immediate result is not a blanket ban on foreign credit cards but a narrower squeeze on some overseas banking relationships. The underlying tension is straightforward: a rule meant to ensure that money sent abroad is used for an approved purpose, or brought home, is now making some foreign banks reconsider whether Indian residents are the customers they want to keep.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
