The Reserve Bank of India has directed the State Bank of Mauritius (India) to stop all transactions under the Liberalised Remittance Scheme (LRS) until further notice. What is the Liberalised Remittance Scheme (LRS)? This scheme allows outward remittance upto USD 2,50,000 every Financial Year. This scheme is used, for instance, by parents sending money to their kids living abroad. Under the Liberalised Remittance Scheme, Authorised Dealers may freely allow remittances by resident individuals up to USD 2,50,000 per Financial Year (April-March) for any permitted current or capital account transaction or a combination of both. The Scheme is not available to corporates, partnership firms, HUF, Trusts, etc. — RBI’s Master Direction - Liberalised Remittance Scheme (LRS) Why RBI issued this direction In its press release, the RBI did not state any clear reason for its actions. It said, “This action is based on certain material supervisory concerns observed in the bank.” However, a source-based Reuters report states that the RBI had “concerns that certain overseas money transfer practices of SBM's fintech partners did not follow the appropriate procedures”. "For money transfers, the account has to be opened with the bank even if it is via a fintech (company), which is typically more convenient, and this needs to be fixed,” the source added. The source also said that SBM is working on ensuring that it meets all requirements as soon as possible. Why it matters: SBM India is well-known for its partnership with fintechs. The Economic Times had said that SBM India is…
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