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HDFC Bank Warns: Cards Banned for Foreign Investments
24 Apr
Summary
- HDFC Bank advises customers against using cards for foreign investments.
- Using cards for overseas property or stock purchases violates rules.
- Capital account transactions require proper banking channels, not cards.
HDFC Bank has issued a stern warning to its customers, urging them to cease using credit, debit, and forex cards for any capital account transactions outside India. This includes purchasing stocks, floating companies, or acquiring properties abroad, as well as opening offshore bank accounts.
These transactions are in direct violation of foreign exchange and banking regulations. The bank emphasized that such overseas investments must be conducted through 'proper banking channels' and explicitly excludes card payments. Failure to comply can result in penalties from the Reserve Bank of India (RBI).
The advisory comes as many individuals are increasingly targeted by foreign brokers and developers, especially in the UAE, offering tempting investment opportunities. These entities often provide payment links via email and WhatsApp, encouraging the use of international cards for cross-border remittances.
Srinivas Maddury, a managing partner at Maddury & Associates, noted that while individuals can remit up to $250,000 annually under the RBI's liberalised remittance scheme (LRS) for investments, this must be done via banking channels. Card payments are not considered valid for such remittances and can attract severe penalties.
Banks face practical challenges in monitoring LRS limits and ensuring compliance when cards are used for capital account transactions. The RBI's Master Direction on 'Other Remittance Facilities' guides these regulations, distinguishing between permitted current account transactions and restricted capital account transactions.
