Types of NRI Bank Accounts In India

What is NRI Bank Account:

There are many bank accounts that are available to be used by NRIs for various purposes typically called as NRI Bank Accounts.

Many of the Non-Resident Indians who go abroad either on deputation of employment or to setup a business entity in foreign countries would be in a dilemma on how or where should their money be kept. There would be many other aspects of doubt about a non-resident on the maintenance of their bank accounts in India and also the permitted amount to be maintained with Authorized Dealers (Banks) in India.

Banks in India allow Non-Resident Indians to maintain their accounts in Indian Rupees as well as in Foreign Currencies typically called as NRI Bank Accounts. There are mainly three type of accounts provided by Authorized banks to maintain their monies:

Different Types of NRI Bank Accounts:

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

This account is opened initially by a person leaving India and becoming a Non-Resident. The very first deposit is to be done in Indian rupees only. Any income which accrues or arise in India can also be deposited in this account.

Non-Resident (External) Account Scheme (NRE)

Only non-residents open this type of account (NRI Bank Account) and only foreign currencies can be deposited into this account. One cannot deposit Indian rupees into this account. This account mainly helps persons to transfer money to their family members easily.

Foreign Currency (Non-Resident) Account Scheme (FCNR)

This account (NRI Bank Account) is similar to NRO account whereas it helps to maintain the foreign currency earnings in the same denomination.

Types of NRI Bank Accounts

These accounts are further divided into two types of Non-Resident Indian accounts namely:

Repatriable Accounts

Indian rupees in this type of account (NRI Bank Account) can be converted to any foreign currency.

Non-Repatriable Accounts

Monies in this type of account cannot be converted to any foreign currency.

There are a few contexts in which the above three accounts can be differentiated and a non-resident can decide as to which account is more preferable for him to maintain his funds based in the following areas,

Eligibility – Applicable to,

  • NRE and FCNR– Non-Resident Indian (NRI) or Persons of Indian Origin (PIO). Individual entities of Pakistan, and Bangladesh shall require prior approval of RBI.
  • NRO – Any person resident outside India for putting through Bonafide transaction in rupees.

Whether Power of Attorney Holder permitted to open the Accounts? – NO. None of the above three NRI Bank Accounts can be opened by Power of Attorney Holder.

Types of Accounts –

  • NRE and NRO– Savings, Current, Recurring and Fixed Deposit
  • FCNR – Term Deposit

Currency

  • NRE – Indian Rupees
  • FCNR – Any permitted currency that is a foreign currency which is freely convertible
  • NRO – Indian Rupees

Repatriability  

  • NRE and FCNR – Repatriable
  • NRO – Non-repatriable except for current income. Balances in NRO account of NRI/PIO are repatriable upto USD 1 million per financial year along with their eligible other assets.

Permitted Credits – Credits permitted to these accounts are,

NRE and FCNR

  • Inward Remittances from outside India.
  • Interest on Investment.
  • Transfer from other NRE/FCNR Accounts.
  • Maturity Proceeds of investments (if such investment were made through these accounts or through inward remittance.)
  • Additionally, for NRE account current income like dividend, rent, pension, interest, etc will be construed as a permissible credit, but not allowed in FCNR account.

NRO

  • Inward Remittance in permitted currency from outside India.
  • Legitimate dues in India of the account holder.
  • Transfer from other NRO Accounts or any amount received by the account holder in accordance with rules and regulations of the FEMA Act.
  • Rupee Gift/Loan made by a resident to NRI/PIO relative within the prescribed limit under LRS can be credited to NRO Account.

Permitted Debits –

NRE and FCNR

  • Local disbursements
  • Remittance outside India
  • Transfer to other NRE/FCNR accounts
  • Investments in India and
  • Purchase of Immovable Property in India

NRO

  • This account can be debited for purpose of local payments, transfer to other NRO accounts or remittance of current income abroad.
  • NRIs/PIOs can repatriate funds upto USD 1 million subject to conditions specified in FEMA Act.
  • Out of the limit of USD 1 million mentioned above funds can be transferred to NRE account too.

Rate of Interest – All the three accounts (NRI Bank Accounts) provide rate of interest as per the directions or instructions issued by Reserve Bank of India.

Loan to Account Holder –

NRE and FCNR

  • Authorized Dealers (ADs) are permitted to grant loan (Fund or Non-Fund based) to account holder only for personal use or for making direct investments in India on non-repatriation basis or for acquiring flat in India for his own residential use.
  • Amount granted to these account holders can be used in carrying on agricultural or plantation activities or for investment in real estate business or for re-lending.
  • Loan amount cannot be repatriated outside India.
  • Repayment of loan can either be adjustment of deposit or by fresh inward remittances from outside India or from NRO Account of the account holder.
  • Premature withdrawal of deposits will not be permitted where loan against such deposit is availed of.

NRO

  • ADs are permitted to grant loan to account holders in rupees against the security of fixed deposits for personal purpose or for carrying on business activities.
  • Loan amount cannot be used for re-lending or carrying on agricultural or plantation activities or for investment in real estate business.

Loan to Third Parties

NRE and FCNR

  • ADs can grant loan (fund or non-fund based) to resident individuals or firms or companies in India against the Collateral of FDs held in NRE account to be utilized for personal purposes.
  • There should be no direct or indirect foreign exchange consideration for non-resident depositor agreeing to pledge his deposits.
  • Further, for an NRE account, premature withdrawal of deposits will not be permitted where loan against such deposit is availed of.

NRO

  • Loans or overdrafts to resident individuals or firms or companies in India may be granted against the security of deposits held in NRO Account for the purpose of meeting borrowers’ personal requirements and / or business purposes and not for carrying on agricultural or plantation activities or for investment in real estate business.

The three NRI Bank Accounts above differ from each other in many areas and each account has its own conditions to be fulfilled for maintenance of non-resident monies in these accounts. Hence a non-resident can invest his money in any of the above accounts fulfilling the conditions set up in FEMA Act.



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