What ICICI Bank has done : Indian Bank Blocks Use of RBI’s Remittance System for Crypto.

What ICICI Bank has done : Indian Bank Blocks Use of RBI’s Remittance System for Crypto.

Hi Friends,

I am writing this in continuation to my earlier article titled “Cryptos & Blockchain Vs. Reserve Bank of India”.   


Today there is news about India’s biggest private sector bank ‘ICICI Bank’ how it has fabricated FEMA and RBI’s Liberalised Remittance Scheme (LRS) to show it’s ulterior moves towards Crypto industry in India.

ICICI has started asking it’s customers not to use RBI’s scheme of LRS for buying / making investments in cryptocurrencies. 

ICICI , a leading private bank in India, has updated its retail outward remittance application to include cryptocurrency. 

By doing so, the bank indirectly is asking its customers to declare under India’s Foreign Exchange Management ACT 1999 (FEMA) that they will not use the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) for any crypto related investments.

 The bank’s declaration states :

 Ø  “The above remittance is not for investment / purchase of bitcoin / cryptocurrencies / virtual currencies (such as ethereum, ripple, litecoin, dash, peercoin, dogecoin, primecoin, chinacoin, ven, bitcoin or any other virtual currency / cryptocurrency / bitcoin).”

 Ø  Customers must also declare that the remittance is not for any investments in a “company dealing in bitcoins / cryptocurrency / virtual currencies.” 

Ø  It’s not only ICICI has stopped, it is asking its customers about the sources of funds also in the declaration that “The source of funds for the proposed remittance is not proceeds from redemption of investment in cryptocurrencies / bitcoins / virtual currencies and also end use of.”

If you remember the time of 2018 when RBI had banned banks from providing services to crypto business, it was ICICI bank among front leading banks who stopped services to their customers for cryptos. 

In May, RBI issued a letter to all banks in India with clarification on it’s 2018 ban that such circular of 2018 is not binding / valid from the Supreme court judgement of March 2020, and therefore can not be cited or quoted from. In March,2018 Supreme court has quashed the RBI’s imposed ban on banks. 

Latest development is that again proposed Indian Crypto Bill is ready for Cabinet consideration.

It seems ICICI has taken the responsibility of designing it’s own FEMA and RBI’s LRS scheme.

It’s also important to discuss about certain regulations of LRS & FEMA,1999 :

RBI regulate LRS scheme through it’s Master Circular no. RBI/FED/2017-18/3 FED Master Direction No. 7/2015-16 latest updated on June 20, 2018, link to this circular also shared herewith : 


This LRS scheme is applicable for all Indian resident individuals as per following extracts taken from RBI’s “Master Direction – Liberalised Remittance Scheme (LRS)” :

“A. Liberalised Remittance Scheme (LRS) of USD 2,50,000 for resident individuals 

1. Under the Liberalised Remittance Scheme, Authorised Dealers may freely allow remittances by resident individuals up to USD 2,50,000 per Financial Year (April-March) for any permitted current or capital account transaction or a combination of both. The Scheme is not available to corporates, partnership firms, HUF, Trusts, etc.” 

“5. All other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges/ overseas counterparty are not allowed under the Scheme.” 

If ICICI bank is acting under this provision, then investing in cryptocurrencies is different from margins or margin calls which falls under derivatives. ICICI should have asked its customers to declare that forex under LRS is not being used for margins or margin calls. 

Point no.6 of the master circular also  can be used sometimes to mark crypto investments as under asset class, unrated debt securities etc. 

Point no. 8 of the master circular also can be used to mark our crypto investments like in NFTs etc. 

“8. Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.” 

Point no. 12 of the circular also can be checked which mentions about prohibitory transactions mentioned in the certain schedules of FEMA, as amended from time to time. Nowhere in FEMA anything mentioned about cryptocurrencies as prohibited transaction.

“12. The Scheme is not available for remittances for any purpose specifically prohibited under Schedule I or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transaction) Rules, 2000, dated May 3, 2000, as amended from time to time.” 

Under LRS master circular, RBI has issued operational instructions to Authorised persons (Banks one of them) : 

Extracs from circular : 

“B. Operational instructions to Authorised Persons

2. The Reserve Bank will not, generally, prescribe the documents which should be verified by the Authorised Persons while releasing foreign exchange for current account transactions. In this connection, attention of authorized persons is drawn to sub-section (5) of Section 10 of the FEMA, 1999 which provides that an authorised person shall require any person desiring to transact in foreign exchange to make such a declaration and to give such information as will reasonably satisfy him that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of the FEMA or any rule, regulation, notification, direction or order issued there under.”

This is the point which covers about the declaration kind of thing. Sub-section 5 of section 10 of the FEMA,1999 clearly mentions that any person (individual resident in India) has to make such a declaration and to give such information that the transaction will not involve any evasion of the provisions of the FEMA. I will be obliged if someone can tell me whether dealing in cryptocurrencies is prohibited in FEMA’1999.

How ICICI can act at its own and decide the law of the land. 

This is the time when all crypto companies / crypto enthusiasts should raise a voice against the one sided acts of ICICI bank.

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