Tuesday, December 9, 2014

Types of NRI Accounts


Facilities for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs)

                                                      ( Link to RBI Website )

(Updated up to September 19, 2014)
In terms of the Foreign Exchange Management Act (FEMA), 1999 a person resident outside India means a person who is not resident in India.
What are the different types of accounts which can be maintained by an NRI1/PIO2 in India?
If a person is NRI or PIO, she/ he can, without the permission from the Reserve Bank, open, hold and maintain the different types of accounts given below with an Authorised Dealer in India, i.e. a bank authorised to deal in foreign exchange. NRO Savings accounts can also be maintained with the Post Offices in India.
Types of accounts which can be maintained by an NRI / PIO in India
A. Non-Resident Ordinary Rupee Account (NRO Account)
Any person resident outside India may open NRO account with an authorised dealer or an authorised bank for the purpose of putting through bona fide transaction in rupees.
Opening of accounts by individual/ entities of Pakistan and entities of Bangladesh require prior approval of Reserve Bank of India.
NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts.
Savings Account - Normally maintained for crediting legitimate dues /earnings / income such as dividends, interest etc. Banks are free to determine the interest rates.
Term Deposits - Banks are free to determine the interest rates. Interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
● Account should be denominated in Indian Rupees.
● Permissible credits to NRO account are transfers from rupee accounts of non-resident banks, remittances received in permitted currency from outside India through normal banking channels, permitted currency tendered by account holder during his temporary visit to India, legitimate dues in India of the account holder like current income like rent, dividend, pension, interest, etc., sale proceeds of assets including immovable property acquired out of rupee/ foreign currency funds or by way of legacy/ inheritance.
● Eligible debits such as all local payments in rupees including payments for investments as specified by the Reserve Bank and remittance outside India of current income like rent, dividend, pension, interest, etc., net of applicable taxes, of the account holder.
● NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes.
● The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/ PIOs.
● Other than current income and the limit of USD 1 Mn per financial year applicable to NRIs/PIOs, balances in NRO accounts cannot be repatriated without the prior approval of RBI.
● The accounts may be held jointly with residents and / or with non-resident Indian.
● The NRO account holder may opt for nomination facility.
● NRO (current/savings) account can also be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. The details of this facility are given in the FAQs on “Accounts opened by Foreign Nationals and Foreign Tourists” available on the RBI website.
● Loans to non-resident account holders and to third parties may be granted in Rupees by Authorized Dealer / bank against the security of fixed deposits subject to certain terms and conditions.
B. Non-Resident (External) Rupee Account (NRE Account)
● NRE account may be in the form of savings, current, recurring or fixed deposit accounts (with maturity of minimum one year). Such accounts can be opened only by the NRI (as defined under Regulation 2(vi) of Notification No. FEMA 5/2000-RB dated May 3, 2000) himself and not through the holder of the power of attorney.
● NRIs may be permitted to open NRE account with their resident close relatives (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor ‘basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the life time of the NRI/PIO account holder.
● Account will be maintained in Indian Rupees.
● Balances held in the NRE account are freely repatriable.
● Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.
● Authorised dealers/authorised banks may at their discretion/commercial judgement allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/repaid within a period of two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE/FCNR accounts.
● Savings - Banks are free to determine the interest rates.
● Term deposits – Banks are free to determine the interest rates of term deposits of maturity of one year and above. Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
● Permissible credits to NRE account are inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers' cheques, issued against encashment of foreign currency, where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-I / Category-II, transfers from other NRE / FCNR accounts, sale proceeds of FDI investments, interest accruing on the funds held in such accounts, interest on Government securities/dividends on units of mutual funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of refunds, etc.
● Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligible to open such accounts, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc.
● Loans can be extended against security of funds held in NRE Account either to the depositors or third parties without any ceiling subject to usual margin requirements.
● Such accounts can be operated through power of attorney in favour of residents for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself.
C. Foreign Currency Non Resident (Bank) Account – FCNR (B) Account
● NRIs are eligible to open and maintain these accounts.
● FCNR (B) accounts are only in the form of term deposits of 1 to 5 years
● All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also.
● Account can be held in any freely convertible currency.
● Loans can be extended against security of funds held in FCNR (B) deposit either to the depositors or third parties without any ceiling subject to usual margin requirements.
● The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India. With effect from March 1, 2014, in respect of FCNR (B) deposits of maturities, 1 year to less than 3 years, interest shall be paid within the ceiling rate of LIBOR/ SWAP rates plus 200 basis points for the respective currency/ corresponding maturity. For FCNR(B) deposits with maturity of 3-5 years interest shall be paid within the ceiling rate of LIBOR/ SWAP rates plus 300 basis points. On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency/ maturity plus 200 bps/ 300 bps, as the case may be. For floating rate deposits, the interest reset period shall be six months.
● When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him.
● Terms and conditions as applicable to NRE accounts in respect of joint accounts, repatriation of funds, opening account during temporary visit, operation by power of attorney, loans/overdrafts against security of funds held in accounts, shall apply mutatis mutandis to FCNR (B). NRI can open joint account with a resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on former or survivor basis. The resident close relative will be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.
Is the permission of the Reserve Bank required for opening the various accounts, mentioned above, by Bangladesh / Pakistan individuals/entities?
Opening of accounts by individuals/entities of Pakistan and entities of Bangladesh nationality requires prior approval of the Reserve Bank.. All such requests may be referred to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, 6 Sansad Marg, New Delhi - 110 001. However, individuals of Bangladesh nationality are permitted to open NRO accounts without the prior approval of Reserve Bank of India, subject to conditions.




1 A Non Resident Indian (NRI) is a person resident outside India, who is a citizen of India or is a person of Indian origin.
2 A Person of Indian Origin (PIO) for this purpose is defined in Regulation 2 of FEMA Notification ibid as a citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held Indian passport; or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b).
3 'Close relative' means relative as defined in Section 6 of the Companies Act, 1956.
4 'A Person of Indian Origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held an Indian Passport or (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
5 For the purpose of acquisition and transfer of immovable property in India an NRI refers to an Indian Citizen resident outside India (Notification No. FEMA 21/2000_RB dated May 3, 2000, as amended from time to time)

No comments:

Post a Comment