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Can accounts be maintained by NRIs with any bank in India?

Banks holding authorised dealers' licences (i.e. banks authorised to deal in foreign exchange) or banks specifically authorised in this behalf by Reserve Bank of India can only maintain accounts in the names of NRIs. Certain co-operative/commercial banks (referred to as authorised banks) have been specifically permitted to maintain accounts of NRIs expressed in rupees even though they are not authorised dealers.

Are NRIs permitted to maintain accounts in rupees and in foreign currency?

Yes. Accounts can be maintained by NRIs in rupees as well as in foreign currency. Accounts in foreign currencies can, however, be maintained with authorised dealers only.

What are the different types of rupee accounts permitted to be maintained?

Two types of rupee accounts viz. Non-resident (External) Rupee Accounts (NRE) and Ordinary Non-resident Rupee Accounts (NRO) are permitted to be maintained by NRIs.

Can NRIs maintain current/savings/fixed deposit rupee accounts with authorised dealers/authorised banks in India?

NRO and NRE accounts can be maintained in current/savings/fixed deposits form.

During their visit to India, can the Non-Resident Indian use Travellers Cheques or Currency notes to open or credit the existing NRE account?

Non-Resident Indians are permitted to use Travellers Cheques or Currency Notes to open an account or credit the existing NRE account, subject to certain conditions and limits as stated below:
In the case of those foreign currency notes brought by the Non-Resident Indians exceeds USD 5,000 or Travellers Cheques and notes exceeding USD 10,000, the NRI is required to submit the Currency Declaration Form (CDF) to the customs authorities in India. The CDF has to be submitted for endorsement by the bank for opening or credit to an account.

Are Power of Attorney Holders allowed to credit proceeds of foreign currency notes, bank notes and travellers cheques to the NRE accounts?

Power of Attorney Holders are not allowed to credit proceeds of foreign currency notes, bank notes and travellers cheques to the NRE accounts.

Can NRE accounts be opened by the power of attorney holder in India on behalf of a non-resident?

No.

Can resident Power of Attorney holder operate on the NRE accounts?

Yes, but only for local payments to be made on behalf of the account holder. In cases where the account holder or a bank designated by him has been granted permission by Reserve Bank to make investments in India, the Power of Attorney holder (POA) is permitted to operate the account to facilitate such investments. In no circumstance is the Power of Attorney holder allowed to repatriate the funds abroad or make payments of gifts on behalf of the account holder.

What is the difference between NRE account and NRO account?

Balances held in NRE accounts can be repatriated abroad freely, whereas funds in NRO account cannot be remitted abroad but have to be used only for local payments in rupees. Consequently, funds remitted from abroad or local funds which can otherwise be remitted abroad to the account holder can only be credited to NRE accounts. Funds due to the non-resident accountholder which do not qualify, under the Exchange Control regulations, for remittance outside India are required to be credited to NRO accounts.

Can NRO/NRE accounts be maintained by NRIs jointly with residents?

NRO account can be held jointly with residents. However, NRE account cannot be held jointly with residents.

What is the rate of interest payable on such accounts?

Banks in India have been given freedom to decide interest rates on all non-resident rupee accounts. However, the rates of interest on deposits are subject to change as per the directives issued by Reserve Bank (Department of Banking Operations and Development) from time to time.

Are debits and credits to NRO accounts allowed freely by banks maintaining the accounts?

Yes. Debits for local payments are allowed freely. Funds representing legitimate dues of the account holder or proceeds of remittances received from abroad through banking channels are permitted to be credited freely. Debits to the accounts for the purpose of investment in India and credits representing sale proceeds of investments are allowed subject to the accountholder giving an undertaking at the time of opening the account to the effect that such investments/disinvestments would be covered either by the general or special permission of Reserve Bank.

What are the admissible debits and credits to NRE accounts?

Debits for local payments/investments are allowed freely. Credits to an account, of funds emanating from a local source would be permissible only if the funds are of a repatriable nature i.e. funds which are eligible to be remitted abroad.

Can funds in NRE/NRO accounts be repatriated outside India?

Funds held in NRE accounts can be repatriated abroad freely. Funds held in NRO accounts which would generally be from local source cannot be repatriated outside India.

Can the account holder or the dependents of the NRI utilize the funds in the NRE/NRO accounts for payment towards their airfare expenses to or from India?

Yes. The account holder or the dependents of the NRI can utilize the funds in the NRO or NRE accounts for payments towards their airfare expenses to or from India.

Are temporary overdrawings permitted in NRO Savings Bank accounts?

Yes. Authorised dealers, at their discretion, may allow such overdrawings up to Rs.50,000/- subject to the condition that the overdrawings together with the interest payable thereon are cleared within a period of two weeks.

Are NRO/NRE account holders eligible for loans/overdrafts against their fixed deposits?

Yes, except for the purpose of relending, carrying on agricultural/plantation activities or for investment in real estate business. Loans against NRE fixed deposits can, however, be utilised for investments in India on non-repatriation basis, in certain specified areas and for acquisition of flats/houses subject to prescribed conditions.

What are the rates of interest charged on such loans?

The rate of interest on such loans will be as per the directive issued by Reserve Bank (Department Banking Operations and Development) from time to time.

Can loans raised against NRE fixed deposits be repaid out of funds in NRO account?

Yes. The loans raised against NRE deposits can be repaid out of funds held in NRO accounts.

Can a third party in India take loans against the NRO fixed deposit accounts of NRI?

Yes, but subject to certain conditions.

Is nomination allowed in NRO/NRE accounts?

Yes.

Is repatriation of funds belonging to non-resident nominees permitted?

Funds held in NRO account will be allowed to be credited to the non-resident nominee's NRO account only and no repatriation is permitted. Remittance of funds to the non-resident nominee from the deceased person's NRE account will be permitted by authorised dealers.

At what rates are remittances to India by NRIs for credit to NRE/NRO accounts converted into rupees?

Remittances for credit to rupee accounts (i.e. NRE/NRO account) maintained by NRIs are converted at the market rate.

What is the status of NRO/NRE accounts on the return of the account holder to India?

Banks have been advised to redesignate such accounts as resident accounts on return of the account holder to India.

Does the account holder suffer any loss of interest on such redesignation of accounts?

No Banks have been advised to continue to pay interest at the contracted rate till the maturity of the deposit if the deposit is held for the full term even after conversion into resident rupee account.

Can accounts be maintained by NRIs in foreign currencies?

Yes. Accounts in foreign currencies can be maintained by NRIs with authorised dealers in India. This account is called Foreign Currency Non-Resident (FCNR) Account. FCNR Accounts are only in the form of term deposits of 1 to 5 years.

What are the foreign currencies in which such accounts can be maintained?

FCNR Account can be held in any freely convertible currency.

Are FCNR accounts permitted to be maintained in the form of current/savings accounts?

No. FCNR accounts can be maintained only in the form of 'term deposits', i.e. a deposit kept for fixed periods ranging from 1-5 years.

Is premature withdrawal of the FCNR term deposit allowed?

Yes. However, this is subject to the levy of a penalty.

What is the penalty for premature withdrawal of a FCNR deposit?

Interest in such cases is paid at one per cent below the interest rate payable for the period for which the deposit has actually run. Interest on deposits is, however, payable only if they are kept for a minimum period of one year. These matters are governed by the instructions/directives issued by Reserve Bank of India from time to time.

If a FCNR deposit of one year maturity is withdrawn prematurely, would any interest be payable?

No. While the premature withdrawal would be allowed, no interest would be payable. For such premature withdrawals the bank may levy penalty as per their discretion.

What is the rate of interest paid on FCNR deposits?

The interest rates on FCNR deposits are stipulated by the Department of Banking Operations and Development, Reserve Bank of India. With effect from March 1, 2014, in respect of FCNR deposits of maturities, 1-3 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 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.

What about debits to FCNR accounts for local payments?

Debits for local payments in rupees are allowed freely.

Are funds in FCNR accounts freely repatriable abroad?

Yes. Authorised dealers maintaining these accounts would allow repatriation abroad of these funds.

Can FCNR deposits be held jointly with residents?

No.

Is nomination allowed in FCNR accounts?

Yes.

Can an NRI transfer funds between NRE/FCNR accounts?

Yes. The funds can be transferred between NRE or FCNR accounts of an account holder and also between NRE or FCNR accounts of two different NRIs, ie, the funds lying in NRE or FCNR accounts of an NRI can be freely transferred to NRE or FCNR account of any other NRI.

Is repatriation of FCNR funds to non-resident nominees permitted?

Yes.

What is the status of FCNR accounts on the return of the account holder to India?

Banks would treat the deposits held in FCNR accounts as resident deposits but would continue to pay interest at the contracted rate till maturity of the deposit.

In order to facilitate the opening of an NRE or FCNR account, are NRIs permitted to utilize the funds of NRO account?

Interest on NRO account (subject to payment of tax) is fully repatriable. However, the funds can be utilised to open NRE or FCNR account after the procedural aspects are complied with ,i.e., tax is deducted at source in case of NRO account and procedure for NRE or FCNR account is complied with.

What are the tax concessions available to NRIs on balances or deposits held in NRE or FCNR accounts?

The income from interest on moneys standing to the credit of NRE or FCNR accounts is exempt from Income Tax. Gifts from such accounts are not liable to Gift Tax as the Gift Tax is abolished w.e.f. 30/9/1998. Similar tax concessions however are not available for NRO accounts.

What is a Resident Foreign Currency (RFC) Account Scheme?

The Resident Foreign Currency (RFC) Account facilitates investment of funds for those individuals of Indian nationality or origin who have returned to India for permanent settlement (Returning Indians) after a stay outside India for a continuous period of not less than one year.

Are the balances in NRE or FCNR account permitted to be credited to RFC account?

The balances in NRE or FCNR account can be credited to RFC Account on the change of the status of the NRE or FCNR Account holder from a Non-Resident to a Resident. 

How long is the NRI permitted to maintain RFC account once he becomes a resident?

A person can maintain an RFC Account, once he becomes a resident for any length of time as long as he remains to be a resident. If his status changes from once again from Resident to Non-Resident, the funds held in RFC account are allowed to be freely remitted abroad or credited to fresh NRE or FCNR account.

Is the interest earned on RFC account liable to tax?

Yes. Interest earned on RFC account is liable to tax in the hands of the account holder provided he is a 'Non Resident' or 'Resident but not ordinarily Resident' as defined under the Income Tax act. There is an obligation on part of the Bank to deduct TDS on interest on such deposits.