Large international banks ask many Indian HNIs to close accounts

economictimes.indiatimes.com:

RBI) on keeping idle funds abroad, is forcing them to close their overseas bank accounts. At least two large British banks, one Swiss lender and a leading Emirates financial institution have snapped their relationships with more than two dozen resident Indians in the past two months, according to service providers and tax practitioners advising these individuals.

They had opened the bank accounts by transferring funds overseas under the RBI’s Liberalised Remittance Scheme (LRS) which allows a local person to invest up to $250,000 a year in stocks, properties, and for maintenance of relatives among other things.

With the minimum balance fixed
by some of the big offshore banks crossing well over $1 million, banks are unwilling to service clients unless they are ready to use the bank’s wealth management arm to bet on stocks and listed debt instruments. Since a bank earns fees from such investments, it is inclined to retain the client even if money left in the account shrinks.

But as funds move out for property purchase — a common investment under LRS — or transferred to a relative of the customer, banks give a short shrift to the client.

In some cases, like the UAE bank (referred above), recently closed a few accounts and handed over drafts to the customer (who may not be left with another overseas account to encash the instrument).
“Amid an overall crunch in fee income, the strategy pursued by some of the foreign banks have multiplied the woes of Indian residents having accounts abroad.

They have increased the minimum threshold limit for on-boarding new clients as well as for existing ones. But, thanks to the limited LRS quota, Indian residents are unable to remit more.