Incidentally, over the five-year period, the rupee has also depreciated by over 11% against the greenback — from 68.05 (RBI reference rate) as of January 2, 2017 to 75.64 as of December 15. However, wealth managers say the erosion of the rupee is not the primary reason why Indians are looking at greener foreign pastures. According to Ashish Gumastha, managing director and CEO, Julius Baer Wealth Advisors India, the attraction for LRS is driven by familial needs. “A lot of HNIs are increasingly becoming global as almost every family now has a member living or studying overseas. The shift is for the right reason… they all want to be global citizens.”

While RBI data shows money under the head of deposits under LRS, there is no clarity on the end use. “These deposits are not merely lying in accounts but are used either to invest in businesses or speculate in assets such as cryptos,” says a leading Mumbai-based chartered accountant (CA) who advises businessmen on overseas investments. These investments could be outside of the standard LRS category of equity and debt, where the outflow has increased from $412 million in 2018 to $507 million in the nine months of CY21. “What is also being reported under LRS heads may not necessarily be a true picture as these are mere category heads under a declaration form,” adds the CA.

While investment under the head of "purchase of immovable property" has been largely constant from $90 million in CY17 to $70 million in the nine months of CY21, there is a growing appetite to invest in properties abroad.

“Clearly, people want to move out of the country for the right reasons more than the wrong reasons. Properties in London are very hot. Also, clients understand the need for diversification in dollar terms as one has to factor in 3-4% depreciation, at the minimum, in the rupee,” says Atinkumar Saha, head-wealth management, Deutsche Bank.

Unlike 2013, when the central bank had introduced strict measures to arrest the fall in the rupee by reducing the LRS limit from $2 lakh to $75,000 a year, which was later restored and hiked to $2.5 lakh, wealth managers believe the central bank needs to double the limit to half a million. But it’s unlikely that the RBI would oblige.

LRS Outflow

Reverse FDI: Indians transferred $68 billion abroad in 5 yrs