Corporate Credit Card Usage Rules RBI’s Crackdown on LRS Misuse
The focus keyphrase corporate credit card usage rules has come under the scanner with the RBI directing banks to ensure stricter compliance. As of June 2025, banks are asking users of corporate credit cards to declare that they’ll use them strictly for business purposes. This move is a response to rising misuse, particularly in bypassing Liberalised Remittance Scheme (LRS) limits.
Why This Move by RBI?
The RBI’s recent communication to banks aims to plug a regulatory gap:
- Corporate cards were being used personally for overseas travel, luxury purchases, and remittances.
- These expenses didn’t fall under the $250,000 annual cap of LRS since they were billed to a company.
- Now, banks are mandated to obtain written declarations that such cards are not used for personal expenses.
Key Compliance Points for Cardholders
Here’s what companies and employees must now adhere to:
| Requirement | Details |
|---|---|
| Declaration | Must state card use is strictly for business purposes |
| Audit Trail | Expense receipts and usage logs must match business claims |
| Company Oversight | Employers must monitor and report misuse |
| Personal Use Prohibited | No use for personal travel, shopping, or remittances |
| KYC & Documentation | Enhanced KYC norms may apply to new card issuances |
Legal Basis: LRS and RBI Oversight
The RBI’s power stems from:
- Foreign Exchange Management Act (FEMA), 1999
- Master Direction on Liberalised Remittance Scheme (updated May 2024)
- Circular: RBI/2024-25/50 A.P. (DIR Series) dated 20.05.2025
Expert Tip: Don’t Assume “Company Pays = No Rules”
Even if your company foots the bill:
“If the underlying spend is personal, it may still fall under LRS. Audit flags may trigger tax scrutiny or FEMA queries,” warns a top compliance officer from a Big 4 firm.
So, always maintain a clear business case for each corporate card spend.
What Should Businesses Do Now?
To stay compliant:
- ✅ Update internal policies on card usage
- ✅ Train finance teams on FEMA and LRS overlaps
- ✅ Keep separate corporate and personal cards
What’s Next?
The RBI may soon release a circular formalising these directions, potentially making declaration and monitoring mandatory under regulation, not just bank policy.
FAQs on Corporate Credit Card Usage Rules
Q1. Can I use my corporate card for personal emergency abroad?
No. Even in emergencies, personal usage is a violation unless specifically permitted under company and RBI rules.
Q2. Will tax authorities see this?
Yes. If misused, such spending may be flagged in TDS/TCS compliance or under FEMA scrutiny.
Q3. Can startups issue corporate cards freely?
Yes, but they must still comply with declaration and usage norms, regardless of size.
Summary Snippet for Google
RBI cracks down on misuse of corporate credit cards under LRS. New rules require users to declare business-only use to prevent bypassing remittance limits. Learn compliance steps.
Final Word
The tightening of corporate credit card usage rules is part of RBI’s broader push to clean up outbound flows under LRS. It’s no longer enough to just have a company card—how you use it matters.