Why global banks are pulling back credit cards from wealthy Indians

Offshore banks are turning cautious on issuing or renewing foreign credit cards for resident Indians because of the LRS 180-day deployment rule. The requirement is reshaping overseas banking relationships for wealthy families and raising practical issues for minors with foreign accounts.Foreign cards offer currency and tax advantages. (Illustration: REUTERS/Dado Ruvic)A credit card renewal is turning into a regulatory headache for some wealthy Indians. Offshore banks in financial centres including Zurich, Singapore and London are becoming reluctant to issue or renew international credit cards for Indian residents. Some of these banks are becoming reluctant to issue or renew such cards to resident Indians, and the reason is not necessarily their credit score.Several offshore banks are refusing to issue or renew international credit cards for wealthy Indians because of India's 180-day requirement for deploying money remitted overseas under the Liberalised Remittance Scheme (LRS).Cards that have expired or are coming up for renewal are being affected by the issue, according to the report. At the heart of the problem is a rule introduced in 2022, when the Reserve Bank of India overhauled overseas investment norms under the LRS.WHY THE 180-DAY RULE IS CAUSING A PROBLEMUnder the LRS, resident Indians can remit up to $250,000 a year abroad for permitted purposes. But there is a condition attached to the money sent overseas. Under the "redeployment" requirement, residents have to spend or invest the remitted money within 180 days. If the money is not deployed, it has to be brought back to India.Simply keeping the money in an overseas savings or checking account does not qualify as deployment. Neither does parking it in a fixed deposit with a foreign bank.Money can instead be considered deployed when it is used for permitted purposes such as buying securities or property, or for current-account transactions such as booking hotels, purchasing air tickets and paying restaurant bills.This becomes a problem for some wealthy Indians who maintain foreign banking relationships and use international credit cards linked to their overseas accounts.Moin Ladha, partner at law firm Khaitan & Co, told The Economic Times that the 180-day requirement is having an "unintended consequence" for the overseas banking relationships of Indian families, as residents have limited flexibility to maintain meaningful balances abroad.WHY DO INDIANS WANT THESE FOREIGN CREDIT CARDS?Foreign-issued international credit cards offer a practical advantage to people who regularly spend overseas.Since expenses can be charged in the same currency in which they are incurred, users can avoid currency conversion costs. Such cards can also be linked to overseas banking relationships and offer spending limits determined by the foreign bank or card operator.Harshal Bhuta, partner at CA firm PR Bhuta & Co, told ET that FEMA does not prescribe a specific monetary ceiling for remittances from India towards settling liabilities on such foreign-issued cards. The operative limit is effectively the credit limit sanctioned by the foreign bank or card operator.But the 180-day rule makes it difficult for some customers to maintain the overseas balances that foreign banks may expect as part of these banking relationships.That is now prompting some banks to rethink whether they want to continue offering these cards to resident Indians.IT'S NOT NECESSARILY ABOUT THE CUSTOMER'S CREDIT SCOREThe unusual part of the situation is that the problem is not necessarily that customers have become riskier borrowers.The Economic Times report said several offshore banks are becoming reluctant to issue or renew these cards despite the fact that the customers' creditworthiness has not necessarily deteriorated.The regulatory restriction on retaining unused money overseas is instead making the underlying banking relationship more difficult for some institutions.For wealthy Indians who have used these cards for years, that could mean losing access to a facility that offered both convenience and lower costs when spending abroad.FOREIGN CREDIT CARD SPENDS HAVE ANOTHER ADVANTAGEThere is another regulatory distinction that makes foreign-issued cards attractive.Bhuta said settlement of foreign credit-card dues is not treated as an LRS remittance under RBI guidance. As a result, spending through foreign-issued international credit cards may remain outside the tax collected at source (TCS) framework applicable to certain LRS transactions.This is different from foreign-exchange spending through credit cards issued by Indian banks, where the tax framework applies to specified forex spends.The report also notes that under FATCA and other data-exchange arrangements, foreign jurisdictions do not automatically share international credit-card spending details with India.This does not mean such spending is outside Indian tax or regulatory requirements. Rather, it highlights why the structure of foreign-issued cards and overseas accounts is different from that of cards issued by Indian banks.WHY MINORS WITH FOREIGN ACCOUNTS ARE ALSO GETTING CAUGHTThe problem is not limited to wealthy adults.The 180-day deployment requirement is also creating difficulties for minors who hold overseas accounts under the LRS.Minors are allowed to remit money under LRS, but they have relatively fewer avenues through which those funds can be appropriately deployed. Overseas banks are therefore increasingly questioning whether some of these accounts should continue, according to the report.Ladha said some calibrated flexibility in the 180-day requirement, particularly for minors, could address these practical problems without weakening the broader objective of the LRS framework.But there is another view.Rajesh Shah, partner at CA firm Jayantilal Thakkar & Co, told ET that the position on minors' remittances has remained unchanged since the LRS was introduced in February 2004. His comments come amid unconfirmed concerns that non-earning family members, including minors, could potentially be used as channels to remit more money than parents could otherwise transfer under the rules.WHY ARE BANKS NOW RECONSIDERING THESE CUSTOMERS?For offshore banks, the issue goes beyond the credit card itself.A foreign-issued card is generally part of a broader banking relationship. If an Indian resident cannot maintain significant unused balances overseas because of the 180-day requirement, the economics and practicality of maintaining that customer relationship can change.That appears to be what is happening with some banks in major offshore financial centres.The result is an unusual situation: a regulatory rule designed to ensure that money sent overseas by Indian residents is actually deployed or brought back is now affecting the availability of a financial product used by some wealthy Indians.WHAT DOES THIS MEAN FOR RESIDENT INDIANS?The issue is particularly relevant for resident Indians who maintain foreign accounts or use international cards issued by overseas banks.The LRS continues to allow eligible residents to remit money abroad, but the 180-day requirement means the money cannot simply be left idle overseas indefinitely.For those using foreign-issued credit cards, the latest development means that the bank's willingness to issue or renew the card could depend not only on the customer's credit profile, but also on whether the broader overseas banking relationship fits within India's remittance rules.For now, the issue appears to be affecting some wealthy customers and certain overseas banking relationships rather than representing a blanket withdrawal of foreign credit cards from all Indian residents.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- EndsPublished On: Aug 10, 2026 16:10 IST