Several offshore banks in Zurich, Singapore, London and West Asia are refusing to issue or renew international credit cards for wealthy Indian residents. According to The Economic Times, this reluctance stems from India's 180-day rule that prohibits resident Indians from maintaining idle money in foreign accounts beyond six months. The restriction is creating practical challenges for wealthy Indians who previously enjoyed the benefits of international credit cards, including unlimited spending limits, no currency conversion charges, and protection from Indian tax authorities.
The 180-day deployment requirement was introduced in 2022 when the Reserve Bank of India overhauled overseas investment norms, including the Liberalised Remittance Scheme (LRS). As reported by The Economic Times, under the redeployment rule, residents must spend or invest within 180 days the LRS amount remitted or bring back unused funds. Holding unspent money in checking accounts or fixed deposits with foreign banks doesn't qualify as deployment, which includes buying securities, properties, or undertaking permitted current account transactions.
International credit cards offer significant advantages for wealthy Indians, including operational efficiency as expenditure is incurred in the same currency, thereby eliminating conversion costs. According to The Economic Times, under FEMA regulations, there's no specific monetary ceiling for remittances from India towards foreign card settlements, with the operative limit being the credit limit sanctioned by foreign banks. Additionally, foreign-issued credit card spends may remain outside TCS collection framework for forex transactions in India, as they're not treated as LRS remittances under RBI guidance.
The 180-day rule is creating particular difficulties for minors holding foreign accounts under the Liberalised Remittance Scheme. As reported by The Economic Times, overseas banks are reneging on minor accounts after initially promoting them, as security investments require account holder consent post risk-assessment, which minors cannot provide. According to Rajesh Shah from Jayantilal Thakkar & Co, the position on minors' remittance has remained unchanged since February 2004 when LRS was introduced, with no plans to change after 22 years of implementation.
Legal experts suggest that while the 180-day requirement serves broader regulatory intent, some flexibility could address practical challenges without diluting the LRS framework. According to Moin Ladha from Khaitan & Co, the unintended consequences are beginning to impact overseas banking relationships of Indian families, making international banks reluctant to offer credit cards linked to accounts with limited flexibility for retaining meaningful overseas balances.
