Opening and maintaining of Bank Accounts in India by Non-Residents Indians (NRIs), Oversea Citizens of India ( OCIs) & Person of Indian Origin (PIOs)
Particulars

 

Non-Resident External Account (NRE Account) Foreign Currency Non-Resident (Bank) Account  (FCNR (B) Account) Non-Resident Ordinary Account            (NRO Account)
Eligible persons- “Resident outside India” to open the account NRIs & PIOs. It may be noted that citizens of Pakistan or Bangladesh or such other country as may be specified by Central Govt. are not covered under the definition of PIOs and therefore are not entitled to open these accounts without permission.  By any person resident outside India may for the purpose of putting through bona fide transactions in rupees not involving any violation of the provisions of the Act, rules and regulations made thereunder.

Opening of accounts by individuals/ entities of Pakistan nationality/ ownership and entities of Bangladesh ownership requires approval of Reserve Bank.

Individual/s of Bangladesh nationality are allowed to open & operate NRO account, provided the individual/s hold a valid visa and valid residential permit subject to satisfaction of AD

Post Offices in India may maintain savings bank accounts in the names of persons resident outside India and allow operations on these accounts subject to the same terms and conditions as are applicable to NRO accounts maintained with an authorised dealer/ authorised bank.

A Citizen of Bangladesh/Pakistan belonging to minority communities in those countries i.e. Hindus, Sikhs, Buddhists, Jains, Parsis and Christians residing in India and who has been granted LTV or whose application for LTV is under consideration, can open only one NRO account only with an AD bank

Currency of the Account It is maintained in INR It is maintained in the permissible currency as may be designated by RBI. If the funds are received in INR or in some other currency, it is first converted into the designated currency of the account. It is maintained in INR
Joint Account NRE accounts are  permitted to be opened as under – (a) In the names of two or more NRIs and/or PIOs or (b) with resident relative(s) on ‘former or  survivor’ basis. However, the said resident 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 account holder. For the purpose of this regulation, ‘relative’ means relative as under:

·  Members of HUF

·  Husband/ Wife

·  Father (including step father), Mother (including step mother), Son, Son’s wife, Daughter, Daughter’s husband, Brother (including step brother), Sister(including step sister).

NRIs and/or PIOs may hold NRO account jointly with other NRIs and/or PIOs. The accounts may also  be held jointly with residents on ‘former or survivor’ basis.

 

Income Tax & Wealth  Tax Exemptions Interest on balances standing to the credit of NRE Accounts is exempt from Income Tax. Likewise balances held in such accounts are exempt from wealth tax. Interest on balances standing to the credit of NRO Accounts is taxable under Income Tax. Likewise balances held in this accounts is taxable under wealth tax.
Operation of Accounts through Power of attorney The accounts can be operated through Power of attorney (POA) as may be operated by account holder for permitted purposes as per RBI guidelines. However POA shall not be allowed to repatriate outside India funds held in the account under any circumstances other than to the account holder himself, nor to make payment by way of gift to a resident on behalf of the account holder nor to transfer funds from the account to another NRE account. The accounts can be operated through Power of attorney as may be operated by account holder for permitted purposes as per RBI guidelines.
Permitted Deposits/ Credits in the account Proceeds from remittance in any foreign currency, personal cheques from his/her foreign currency account, travelers cheques, bank drafts payable in any permitted currency, foreign currency/ bank notes, proceeds by transfers from other NRE/ FCNR (B) accounts, interest accrued on this bank account, Current income in India to the account holder subject to payment of applicable taxes in India, maturity or sale proceeds of any permissible investment, refund of share/ debenture subscriptions to new issues of Indian companies, refund of  application/ earnest money/ purchase consideration made for the residential/ commercial property provided however the investment so made, investment in share/debenture, advance/ investment in property have been  made in accordance with the foreign exchange regulations in force at the time of making such investment. Out of  remittances received in any permitted currency from outside India, permitted currency tendered by the account-holder during his temporary visit to India, transfers from rupee accounts of non-resident banks. Legitimate dues in India of the account holder, transfers from other NRO accounts or any amount received by the account holder as per FEMA or regulations thereunder
Permitted Withdrawals/ Debits in the account Local disbursements, remittances outside India, transfer to NRE/ FCNR (B) accounts of the account holder or any other person, Investment in shares/ securities/ commercial paper of an Indian company or for purchase of immovable property in India or for any other transaction covered under general or special permission granted by the Reserve Bank For local payments in rupees  or investments as per RBI Guidelines, remittance outside India out  of current income in India of the account holder (net of applicable taxes), transfers to other NRO accounts, payment of International Credit Cards issued by authorised dealer /banks in India to NRIs or PIOs, subject to the limits for repatriation of balances held in NRO accounts specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets) Regulations, 2016
Rate of Interest Rate of interest applicable to these accounts shall be in accordance with the directions/ instructions issued by Reserve Bank from time to time
Loans against security of funds held in the account The Authorised Banks/ Authorised Dealers may grant fund based/ non-fund based loans to the account holder in India & outside India for his/her personal use or for  carrying on business activities (except for relending, agricultural/ plantation activities,  investment in real estate business), for Foreign Direct Investment on Repatriation Basis and acquiring flat/ house in India for his own residential use.

Authorised dealers and authorised banks may grant loans to resident individuals/ firms/ companies in India against the collateral of fixed deposits personal use or for  carrying on business activities (except for relending, agricultural/ plantation activities,  investment in real estate business) and  compliance of provisions of FEMA.

Repayment of these loans shall be made out of deposits of account holder, fresh inward remittances from outside India or out of NRO account of the borrower.

The Authorised Banks/ Authorised Dealers may grant fund based/ non-fund based loans to the account holder in India & outside India for his/her personal use or for  carrying on business activities (except for relending, agricultural/ plantation activities,  investment in real estate business), for Foreign Direct Investment on Repatriation Basis and acquiring flat/ house in India for his own residential use.

Authorised dealers and authorised banks may grant loans to resident individuals/ firms/ companies in India against the collateral of fixed deposits personal use or for  carrying on business activities (except for relending, agricultural/ plantation activities,  investment in real estate business) and  compliance of provisions of FEMA.

The usual norms and considerations as applicable in the case of advances to trade/ industry shall be applicable for such loans/ facilities.

Change of residential status of the account holder NRE accounts should be re-designated as resident accounts or the funds held in these accounts may be transferred to the RFC accounts (if the account holder is eligible for maintaining RFC account) at the option of the account holder   immediately upon the return of the account holder to India for taking up employment or for carrying on business or vocation or for any other purpose indicating intention to stay in India for an uncertain period. When an account holder becomes a person resident in India, deposits will  continue till maturity at the contracted rate of interest, if desired by him/ her. However, except for rate of interest and reserve requirements applicable to FCNR (B) deposits, for all other purposes such deposits shall be treated as resident deposits from the date of return of the accountholder to India. Authorised dealers should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC account (if the depositor is eligible to open RFC account), at  the option of the accountholder interest would be accordingly paid. From Resident to Non-resident

When a person resident in India leaves India for a country (other than Nepal or Bhutan) India for taking up employment, or for carrying on business or vocation or for any other purpose with the intention to stay outside India for an uncertain period, his existing account should be designated as a NRO account.

From Non-resident to Resident

On the return of the account holder to India for taking up employment, or for carrying on business or vocation or for any other purpose indicating his intention to stay in India for an uncertain period, NRO accounts may be designated as resident rupee accounts.

Remittance of Funds outside India The maturity proceeds of FCNR (B) deposits can be remitted to third parties outside India, provided the transaction is specifically authorised by the account holder and the authorised dealer is satisfied about the bona fides of the transaction. Balances in NRO accounts are not eligible for remittance outside India without the general or specific approval of Reserve Bank. Funds received by way of remittances from outside India in foreign exchange which have not lost their identity as remittable funds will only be considered by Reserve Bank for remittance outside India. Where an account (current/ savings) is opened by a foreign tourist visiting India, with funds remitted from outside India in a specified manner or by sale of foreign exchange brought by him to India, authorised dealers may convert the balance in the account at the time of departure of the tourist from India to foreign currency for payment to the account holder provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon.
Repatriation of funds to non-resident nominee The funds lying in the NRE account of the deceased account holder can be transferred  to his non-resident nominee. The amount due/ payable to non-resident nominee from the account of a deceased account holder, shall be credited to NRO account of the nominee with an authorised dealer/ authorised bank in India.
Others Remittances abroad by Resident nominee                           The resident nominee shall submit the application to RBI for remittance of funds outside India for meeting the liabilities, if any, of the deceased account holder or for similar other purposes. Conversion rate:

-For inward remittance- clean T.T. selling rate for that currency ruling on the date of conversion

-For outward remittance- clean T.T. buying rate for that currency ruling on the date of conversion

Inland Movement of Funds:

Any inland movement of funds for the purpose of opening these accounts as well as for repatriation outside India of balances held in these accounts will be free of inland exchange or commission for the non-resident depositors. The Authorised dealer receiving foreign currency remittances in these accounts will also, on request, pass on the foreign currency to another authorised dealer if the account has to be opened with the latter, at no extra cost to the remitter.

Treatment of Loans/ Overdrafts in the event of change in the resident status of the borrower

In case of person who had availed of loan or overdraft facilities while resident in India and who subsequently becomes a person resident outside India, the authorised dealer may at their discretion and commercial judgement allow continuance of the loan/ overdraft facilities. In such cases, payment of interest and repayment of loan may be made by inward remittance or out of legitimate resources in India of the person concerned.

Special Non-Resident Rupee Account – SNRR account

  1. Any person resident outside India, having a business interest in India, may open Special Non-Resident Rupee Account (SNRR account) with an authorised dealer for the purpose of putting through bona fide transactions in rupees, not involving any violation of the provisions of the Act, rules and regulations made thereunder. The business interest, apart from generic business interest, shall include the following INR transactions, namely, :-
    • Investments made in India in accordance with Foreign Exchange Management (Non-debt Instruments) Rules, 2019 dated October 17, 2019 and Foreign Exchange Management (Debt Instruments) Regulations, 2019 notified vide notification no. FEMA 396/2019-RB dated October 17, 2019, as applicable, as amended from time to time;
    • Import of goods and services in accordance with Section 5 of the Foreign Exchange Management Act 1999 and rules made & Notifications issued
    • Export of goods and services in accordance with Section 7 of the Foreign Exchange Management Act 1999 and rules made & Notifications issued thereunder.
    • Trade credit transactions and lending under External Commercial Borrowings (ECB) framework in accordance with Foreign Exchange Management Act 1999 and rules made & Regulations issued thereunder; and
    • Business related transactions outside International Financial Service Centre (IFSC) by IFSC units at GIFT city like administrative expenses in INR outside IFSC, INR amount from sale of scrap, government incentives in INR, etc. The account will be maintained with bank in India (outside IFSC).
  2. The SNRR account shall carry the nomenclature of the specific business for which it is in operation. Indian bank may, at its discretion, maintain separate SNRR Account for each category of transactions or a single SNRR Account for a person resident outside India engaged in multiple categories of transactions provided it is able to identify/ segregate and account them category-wise.
  3. The operations in the SNRR account shall not result in the account holder making available foreign exchange to any person resident in India against reimbursement in rupees or in any other
  4. The SNRR account shall not bear any
  5. The debits and credits in the SNRR account 8shall be specific/ incidental to the business proposed to be done by the account
  6. Authorised dealers shall ensure that the balances are commensurate with the business operations of the account
  7. All the operations in the SNRR account should be in accordance with the provisions of the Act, rules and regulations made
  8. The tenure of the SNRR account shall be concurrent to the tenure of the contract / period of operation / the business of the account holder and in no case shall exceed seven years. Approval of the Reserve Bank shall be obtained in cases requiring renewal: Provided the restriction of seven years shall not be applicable to SNRR accounts opened for the purposes stated at sub. paragraphs i to v of paragraph 1 herein above.
  9. The balances in the SNRR account shall be eligible for
  10. Transfers from any NRO account to the SNRR account are
  11. All transactions in the SNRR account will be subject to payment of applicable taxes in
  12. SNRR account may be designated as resident rupee account on the account holder becoming a resident.
  13. The amount due/ payable to non-resident nominee from the account of a deceased account holder, shall be credited to NRO/NRE account of the nominee with an authorised dealer/ authorised bank in India or by remittance through normal banking channels.
  14. The transactions in the SNRR accounts shall be reported to the Reserve Bank in accordance with the directions issued by it from time to
  15. Opening of SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh requires prior approval of Reserve Bank.