India to tighten remittance rules, bar offshore time deposits, sources say

India's central bank plans to tighten rules for overseas remittances by resident Indians, barring them from holding foreign currency deposits with lock-in periods, two government sources said.

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The Reserve Bank of India (RBI) will amend regulations to prevent overseas transfers from being used to park money in time deposits or other interest-bearing accounts abroad, one of the sources said.

"This is akin to passive wealth shifting, which is a red flag for the RBI in a still-controlled capital regime," the first source familiar with the thinking of the central bank said.

The proposed changes reflect India's cautious stance on a rise in outward remittances and full convertibility of the rupee, as authorities strive to safeguard foreign exchange reserves and manage currency volatility, the sources said.