Context: Recently, Reserve Bank of India released data for April 2020 in which Indians remitted just $499.14 million under the Liberalised Remittance Scheme (LRS), a whopping decline of 61 % from $1,287.91 million in April 2019.
Key Points

• The sharpest decline of 71.81%  has been recorded in money sent for travel purposes which came down to $121.13 million in April this year from $429.75 million a year ago.
• The money sent for studies abroad has also seen a sharp decline of 68.85% — $78.76 million in April this year from $252.84 million in April last year.
• “Maintenance of close relatives” category, which contributes the highest amount to total outward remittances under LRS has recorded a decline of 50%,$148.25 million in April this year from $296.14 million in April last year.
• While the category “Gift” has recorded a 66% decline in outward remittances, “medical treatment” has seen a decline of 45.85% in April 2020. 
• Two categories, which recorded lesser decline are  ‘deposit’ and ‘investment in equity/debt’. The amount of money sent out of the country for the purpose of deposit just declined by 7.69% in April 2020 compared to the same month last year.
• Similarly, ‘deposit’ and ‘investment in equity/debt’ has recorded a decline of 29.91%.
• Resident Indians have remitted a record $18.75 billion under LRS in the financial year ended March 31, 2020.

Overall Impact

• Significantly, the cut in expenses on education, medical treatment and maintenance of relatives may endure beyond the travel ban and Covid due to financial strain.
• Investment in shares and debt instruments used to buy immovable properties in overseas markets may decline.
• Opening of foreign currency accounts with banks outside India may also get reduced.
• In nutshell it would affect the currency reserve of the country as an Indian resident needs to buy dollars using the Indian rupees (INR) from an authorised dealer (the bank) in India.

About Liberalised Remittance Scheme (LRS)

• The Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI) allows resident individuals to remit a certain amount of money during a financial year to another country for investment and expenditure.
• According to the prevailing regulations, resident individuals may remit up to $250,000 per financial year permissible for current or capital account transactions or a combination of both and this money can be used to pay expenses related to travelling (private or for business), medical treatment, studying, gifts and donations, maintenance of close relatives and so on.
• The remitted amount can be invested in shares, debt instruments, and can be used to buy immovable properties in the overseas market. 
• Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the scheme.

Restrictions

• LRS restricts buying and selling of foreign exchange abroad, or purchase of lottery tickets or sweepstakes, proscribed magazines and so on, or any items that are restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000.