Types of NRI Bank Accounts

    
            The main type of NRI accounts are:

(1) Non-Resident (Ordinary) Rupee Account Scheme (NRO)

(2) Non-Resident (External) Rupee Account Scheme (NRE)

(3) Foreign Currency (Non-Resident) Account (FCNR-B)

(4) Resident Foreign Currency Account Scheme (RFC)


 

Non-Resident (Ordinary) Rupee Account Scheme (NRO)

 

Eligibility

Any person resident outside India may open NRO A/c.

Opening of Account in the name of individuals / entities of Bangladesh / Pakistan nationality / ownership requires RBI approval.

Savings Bank Accounts can also be maintained in Indian Post Offices and can be operated in a manner similar to NRO A/c.

Types of Accounts

Accounts can be:

  1. Savings Account ;
  2. Current Account;
  3. Recurring Deposit (RD) Account; or
  4. Fixed Deposit (FD) Account.

Opening of Account

NRO A/c can only be opened and maintained in Indian Rupees (INR).

The account holder should furnish an undertaking at the time of opening of the Account that the credits and debits relating to investments and disinvestments shall be in accordance with RBI regulations.

Permitted Credits

The following are the credits allowed into the Account:

  1. Proceeds of remittances to India in any permitted currency;
  2. Permitted currency tendered by the account holder during his temporary visit to India;
  3. Transfer from rupees accounts;
  4. Legitimate dues of the account holder in India;

Permitted Debits

  1. Local disbursements in Indian Rupees;
  2. Remittances outside India of current income in India net of applicable taxes;

Rate of Interest

Interest payable on NRO A/c will be at the same rates as on resident accounts. These rates vary from time to time as per directions issued by Reserve Bank of India.

The rates of interest offered by various Banks in India differ.

It is beneficial to ascertain the best of the rates offered by various banks before investing with any particular Bank.

Loans against balances held in the account

  1. Loans / Overdrafts are granted to the account holder against security of fixed deposits for:
  • Personal purposes or for carrying on business activities.
  • Loans cannot be used for:
  1. re-lending;
  2. carrying on agricultural / plantation activities; or
  3. investment in real estate business.
  1. Loans / Overdrafts are also granted to third parties resident in India:

        Conditions to be fulfilled:

    Loan should be utilised for personal purposes or for carrying on business activities.

            Loans cannot be used for:

  1. re-lending;
  2. carrying on agricultural / plantation activities; or
  3. investment in real estate business.

Change of Residential status

The existing accounts of a person resident in India going abroad and gaining non-resident status are automatically designated as Ordinary Non-Resident Accounts (NRO A/c).

On immigrating to India NRO Accounts can be re-designated as resident rupee accounts.

In case of loans or overdraft facilities availed by a person resident in India, and who subsequently becomes a person resident outside India, payment of interests and repayment of loan may be made by inward remittance or out of legitimate resources in India of the account holder.

Nomination / Cancellation

Funds lying in the NRO Account on the death of an account holder can be credited to the NRO account of his non-resident nominee.

Joint Accounts

Non-Residents can also open joint accounts with residents in India.

Tax Liability

Interest earned on balances in NRO A/c is subject to Indian Income Tax and is deducted at source. Interest earned is repatriable fully from 1996 onwards. The principal amount is entirely non-repatriable.

Non-Resident (External) Rupee Account Scheme (NRE)

Eligibility

The following are permitted to open and maintain these accounts:

  1. NRIs (Non-Resident Indians); and
  2. OCBs (Overseas Corporate Bodies).

The non-resident should open the Account himself.

  1. Power of Attorney holder on behalf of non-resident cannot open the Account.
  2. Opening of Account in the name of individuals / entities of Bangladesh / Pakistan nationality / ownership requires RBI approval.

Types of Accounts

Accounts can be:

  1. Savings Account ;
  2. Current Account;
  3. Recurring Deposit (RD) Account; or
  4. Fixed Deposit (FD) Account.

Permitted Credits

The following are the credits allowed into the Account:

  1. Proceeds of remittances to India in any permitted currency;
  2. Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency. The traveller's cheques / drafts should be in the name of the account holder or endorsed in his favour;
  3. Proceeds of foreign currency notes / bank notes tendered by account holder and the same is declared on a Currency Declaration Form (CDF);
  4. Transfer from NRE / FCNR Accounts;
  5. Interest accruing on the funds held in the account;
  6. Interest on Government securities and dividend on units of mutual funds. The securities / units should be purchased out of funds in NRE / FCNR Account or out of inward remittance of foreign exchange;
  7. Maturity / Sale proceeds of the following:
  1. Government securities; or
  2. Units of Mutual Funds.

The securities or units should be purchased out of funds in NRE / FCNR Account or out of inward remittance of foreign exchange;

  1. Refund of subscription monies made to new issues of shares or debentures of Indian Companies. Subscription should have been made out of funds in NRE / FCNR Account or out of inward remittance of foreign exchange;
  2. Refund of application / earnest money made by house-building agencies on account of non-allotment of flat / plot. Interest payable by the agency can also be credited if tax has been deducted at source. Application / Earnest money should have been paid out of funds in NRE / FCNR Account or out of inward remittance of foreign exchange; and
  3. Any other credit if covered under general or special permission granted by Reserve Bank of India (RBI).

Permitted Debits

  1. Local disbursements;
  2. Remittances outside India;
  3. Transfer to NRE / FCNR Account of the account holder or of any other person eligible to maintain such account;
  4. Investment in shares / securities / commercial paper of an Indian Company or for purchase of immovable property in India. The RBI should have permitted the investment / purchase; and
  5. Any other debit if covered under general or special permission granted by Reserve Bank of India (RBI).

Rate of Interest

The rates of interest offered by various Banks in India differ.

It is beneficial to ascertain the best of the rates offered by various banks before investing with any particular Bank.

Loans against balances held in the account

  1. Loans are granted to the account holder for:
  1. Personal purposes or for carrying on business activities.

Loans cannot be used for:

  1. re-lending;
  2. carrying on agricultural / plantation activities; or
  3. investment in real estate business.
  1. Making direct investment on non-repatriation basis by contribution to Capital in Indian Firms / Companies.
  2. For acquisition of flat / house in India for the account holder's residential purpose.
  1. Loans are also granted to third parties resident in India:

        Conditions to be fulfilled:

  1. There should be no direct or indirect foreign exchange consideration for the non-resident depositor;
  2. Loan should be utilised for personal purposes or for carrying on business activities.

Loans cannot be used for:

  1. re-lending;
  2. carrying on agricultural / plantation activities; or
  3. investment in real estate business.
  1. The account holder for taking loans outside India can also show these deposits as security.

Banks allow temporary overdrawings on the NRE Savings Bank Accounts. The overdrawings have to be repaid within two weeks out of:

  1. inward remittances; or
  2. by transfer of funds from other NRE / FCNR Account.

Change of Residential status

On immigrating to India:

  1. NRE Accounts can be re-designated as resident accounts; or
  2. Funds held in NRE Accounts may be transferred to RFC Account.

Nomination / Cancellation

Nomination can be in favour of residents or non-residents.

Funds lying in the NRE Account on the death of an account holder can be repatriated to his non-resident nominee.

For remittance of funds by resident nominee outside India for meeting the liabilities of the deceased account holder or for similar other purposes, RBI approval is required.

Joint Accounts

Two or more non-resident individuals can open Joint Account, provided they are Persons of Indian Nationality or Origin. However, Opening of these accounts by a non-resident jointly with a resident is not permissible.

Operations by Power of Attorney (POA) Holder

POA Holder can make withdrawals from the account only for local payments. The POA Holder is permitted to operate the Account to make investments on behalf of the account holder.

However, the POA Holder is not allowed:

  1. to repatriate funds held in the account outside India;
  2. to make payment by way of gift to a resident on behalf of the account holder; or
  3. to transfer funds from the account to another NRE Account.

Cheque Books

Special series of cheques are issued to the account holders by banks for easy identification and quicker processing.

Tax Liability

Income from interest on balances standing to the credit of NRE Accounts is exempt from Income Tax. Balances held in such accounts are exempt from Wealth Tax

 

Foreign Currency (Non-Resident) Account (FCNR)

Eligibility

The following are permitted to open and maintain these accounts:

  1. NRIs (Non-Resident Indians); and
  2. OCBs (Overseas Corporate Bodies).

Opening of Account in the name of individuals / entities of Bangladesh / Pakistan nationality / ownership requires RBI approval.

Types of Accounts

Accounts can be only in the form of Term Deposits (TD). The maturity periods being:

  1. One year and above but less than two years;
  2. Two years and above but less than three years; or
  3. Three years only.

Opening of Account

Accounts can be opened:

  1. with funds remitted from outside India;
  2. with funds received in rupees by debit to the account of a non-resident bank;
  3. by transfer of funds from existing FCNR / NRE Account.

Deposits may be made in designated currencies viz.,

  • US Dollar
  • Pound Sterling;
  • Deutsche Mark;
  • Japanese Yen;
  • Euro; or
  • Any other currency as may be designated by RBI.

Remittances received in Indian Rupees for opening these accounts shall be converted into the designated foreign currencies at the prevailing T.T. Selling Rate.

Permitted Credits

The following are the credits allowed into the Account:

  1. Proceeds of remittances to India in any permitted currency;
  2. Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency. The traveller's cheques / drafts should be in the name of the account holder or endorsed in his favour;
  3. Proceeds of foreign currency notes / bank notes tendered by account holder and the same is declared on a Currency Declaration Form (CDF);
  4. Transfer from FCNR / NRE Accounts;
  5. Interest accruing on the funds held in the account;
  6. Interest on Government securities and dividend on units of mutual funds. The securities / units should be purchased out of funds in FCNR / NRE Account or out of inward remittance of foreign exchange;
  7. Maturity / Sale proceeds of the following:
  1. Government securities; or
  2. Units of Mutual Funds.

The securities or units should be purchased out of funds in FCNR / NRE Account or out of inward remittance of foreign exchange;

  1. Refund of subscription monies made to new issues of shares or debentures of Indian Companies. Subscription should have been made out of funds in FCNR / NRE Account or out of inward remittance of foreign exchange;
  2. Refund of application / earnest money made by house-building agencies on account of non-allotment of flat / plot. Interest payable by the agency can also be credited if tax has been deducted at source. Application / Earnest money should have been paid out of funds in FCNR / NRE Account or out of inward remittance of foreign exchange; and
  3. Any other credit if covered under general or special permission granted by Reserve Bank of India (RBI).

 

Permitted Debits

  1. Local disbursements;
  2. Remittances outside India;
  3. Transfer to FCNR / NRE Account of the account holder or of any other person eligible to maintain such account;
  4. Investment in shares / securities / commercial paper of an Indian Company or for purchase of immovable property in India. The RBI should have permitted the investment / purchase; and
  5. Any other debit if covered under general or special permission granted by Reserve Bank of India (RBI).

For the purpose of payment in rupees, funds held in these accounts shall be converted into Indian Rupees at the prevailing T.T. Buying Rate.

Movement of funds will be free of inland exchange or commission.

 Rate of Interest

The rates of interest offered by various Banks in India differ.

It is beneficial to ascertain the best of the rates offered by various banks before investing with any particular Bank.

Loans against balances held in the account

  1. Loans are granted to the account holder for:
  1. Personal purposes or for carrying on business activities.

Loans cannot be used for:

  1. re-lending;
  2. carrying on agricultural / plantation activities; or
  3. investment in real estate business.
  1. Making direct investment on non-repatriation basis by contribution to Capital in Indian Firms / Companies.
  2. For acquisition of flat / house in India for the account holder's residential purpose.
  1. Loans are also granted to third parties resident in India:

        Conditions to be fulfilled:

  1. There should be no direct or indirect foreign exchange consideration for the non-resident depositor;
  2. Loan should be utilised for personal purposes or for carrying on business activities.

Loans cannot be used for:

  1. re-lending;
  2. carrying on agricultural / plantation activities; or
  3. investment in real estate business.
  1. The account holder for taking loans outside India can also show these deposits as security.

 Change of Residential status

On immigrating to India:

  1. FCNR (B) Accounts can be re-designated as resident accounts; or
  2. Funds held in FCNR (B) Accounts may be transferred on maturity to RFC Account.

Deposits shall continue till maturity at the contracted rate of interest.

 Repatriation of funds to non-resident nominee

Nomination can be in favour of residents or non-residents.

Funds lying in the NRE Account on the death of an account holder can be repatriated to his non-resident nominee.

For remittance of funds by resident nominee outside India for meeting the liabilities of the deceased account holder or for similar other purposes, RBI approval is required.

Joint Accounts

Two or more non-resident individuals can open Joint Account, provided they are Persons of Indian Nationality or Origin.

However, Opening of these accounts by a non-resident jointly with a resident is not permissible.

Operations by Power of Attorney (POA) Holder

POA Holder can make withdrawals from the account only for local payments. The POA Holder is permitted to operate the Account to make investments on behalf of the account holder.

However, the POA Holder is not allowed:

  1. to repatriate funds held in the account outside India;
  2. to make payment by way of gift to a resident on behalf of the account holder; or
  3. to transfer funds from the account to another FCNR Account.

 Temporary Overdrafts

Banks allow temporary overdrafts on the NRE Savings Bank Accounts. The overdrafts have to be repaid within two weeks out of:

  1. inward remittances; or
  2. by transfer of funds from other FCNR / NRE Account.

Tax Liability

Income from interest on FCNR Deposit Account is exempt from Income Tax. Deposit amount in such accounts is exempt from Wealth Tax.

Premature withdrawal of the Deposit

Premature withdrawal of FCNR Deposits for the purpose of opening of NRNR Rupee Deposit Account with an authorised dealer other than the one with whom the FCNR Deposit Account is maintained will attract penalty.

Resident Foreign Currency Account Scheme (RFC)

Eligibility

A person resident in India may open, hold and maintain a Resident Foreign Currency Account.

Opening of Account

Any eligible person may open an account in any foreign currency by submitting application in the prescribed form.

The following documents will also be required attached to the application form:

  1. Attested copy of passport;
  2. Documentary evidence to show that funds proposed to be credited to the account are eligible for the purpose.

RFC Account can be opened out of foreign exchange:

  1. received as pension or any other superannuation or other monetary benefits from employer outside India; or
  2. realized on conversion of the assets owned by him when he was non-resident;
  3. received or acquired as gift or inheritance from a person resident outside India;
  4. acquired or received before 8th July1947 or any income arising or acruing thereon which is held outside India by any person in pursuance of permission granted by the RBI

 Rate of Interest

As per RBI norms, Banks are free to offer any interest rate on these deposits.  Thus, the rates of interest offered by various Banks in India differ. It is always advisable to ascertain the best of the rates offered by various banks before investing with any particular Bank.

Loans/overdrafts against the account

No loan or overdraft shall be allowed either directly or indirectly against balances in an RFC account.

Nomination / Cancellation

The balance in the account, on the death of an RFC account holder, may be repatriated to the resident nominee.

Joint Accounts

Non-Residents can also open joint accounts with residents in India.

Tax Liability

Interest earned on balances in RFC account is subject to Indian income tax.

 

Click Here to Compare the Features of Various NRI Accounts

|| Home||  || Back||