Professional Documents
Culture Documents
Nri Banking
Nri Banking
CHAPTER 1-NRI BANKING AN INTRODUCTION:As per RBI guidelines, the residential status of an Indian changes to that of the Non-Resident, in
the event of his stay abroad being more than 183 days. This period of 183 days is not applicable
in certain cases like going overseas for employment or business. It is mandatory to inform the
bank of your change of your residential status.
With a view to attract the savings and other remittance into India through banking channels from
the person of Indian Nationality / Origin who are residing abroad and bolster the balance of
payment position, the Government of India introduced in 1970 Non-Resident(External) Account
Rules which are governed by the Exchange Control Regulations. The funds held in Non-Resident
(External) Accounts (NRE Accounts) qualify for certain benefits like exemptions from taxes in
India, free repatriation facilities, etc.
NRI banking facilities are available to NRIs and PIOs.
WHO IS A NON RESIDENT INDIAN [NRI]?
A Non Resident Indian (NRI) as per FEMA 1999 is an Indian citizen or Foreign National of
Indian Origin resident outside India for purposes of employment, carrying on business or
vocation in circumstances as would indicate an intention to stay outside India for an indefinite
period. An individual will also be considered NRI if his stay in India is less than 182 days during
the preceding financial year.
To meet the specific needs of non-resident Indians related to their remittances, savings, earnings,
investments and repatriation, the Government of India introduced in 1970 Non-Resident
(External) Account Rules which are governed by the Exchange Control Regulations.
"Non Resident Indian" (NRI) means an Indian citizen or a foreign citizen of Indian origin
(excluding citizens of Bangladesh and Pakistan) residing outside India. Students studying abroad
are also treated as NRIs.
Indian citizen who stays abroad for an indefinite period on employment, business or on any
vocation is a Non-Resident. Diplomats posted abroad, persons posted in UN Organizations and
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NRI BANKING
Officials deputed by PSU on temporary assignments are also treated as Non-residents.
PIO CARD SHCEME
The Government has launched a comprehensive Scheme for the Persons of Indian Origin-called
the PIO Card Scheme. Under this Scheme, Persons of Indian Origin up to the fourth generation
(great grandparents) settled throughout the world, except for a few specified countries, and
would be eligible. The Card would be issued to eligible applicants through the concerned Indian
Embassies/High Commissions/Consulates and for those staying in India on a long term visa, the
concerned Foreigners Regional Registration Officer (Delhi, Mumbai, Calcutta, and Chennai)
would do the same. The fee for the card, which will have a validity of 20 years, would be
US$1000.
In this scheme, unless the context otherwise requires"Person of Indian origin" means a foreign citizen (not being a citizen of Pakistan, Bangladesh
and other countries as may be specified by the Central Government from time to time) if,
He/she at any time held an Indian passport; or
He/she or either of his/her parents or grandparents or great grandparents was born in and
permanently resident in India as defined in the Government of India Act, 1935 and other
territories that became part of India thereafter provided neither was at any time a citizen of
any of the aforesaid countries (as referred to in 2(b) above); or
He/she is a spouse of a citizen of India or a person of Indian origin covered under (I) or (ii)
above.
Besides making their journey back to their roots simpler, easier and smoother,
this Scheme
entitles the PIOs to a wide range of economic, financial, educational and cultural benefits. The
benefits envisaged under the Scheme include: No requirement of visa to visit India;
No requirement to register with the Foreigners Registration Officer if continuous stay does
not exceed 180 days. If continuous stay exceeds 180 days, then registration is required to be
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NRI BANKING
done within a period of 30 days of the expiry of 180 days;
Parity with Non-Resident Indians in respect of facilities available to the latter in economic,
financial, educational fields etc. These facilities ill include:
Acquisition, holding, transfer and disposal of immovable properties in India except of
agricultural/plantation properties;
Admission of children in educational institutions in India under the general category quota for
NRIs- including medical/engineering colleges, IITs, IIMs etc.
Various housing schemes of Life Insurance Corporation of India, State Governments and
other Government agencies;
All future benefits that would be extended to NRIs would also be available to the PIO Card
holders;
However, they shall not enjoy political rights in India.
What is an OCB?
Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian
nationality or origin resident outside India and include overseas companies, partnership firms,
societies and other corporate bodies which are owned, directly or indirectly, to the extent of at
least 60% by individuals of Indian nationality or origin resident outside India as also overseas
trusts in which at least 60% of the beneficial interest is irrevocably held by such persons. Such
ownership interest should be actually held by them and not in the capacity as nominees. The
various facilities granted to NRIs are also available with certain exceptions to OCBs as long as
the ownership/beneficial interest held in them by NRIs continues to be at least 60%
What are the various facilities available to NRIs/OCBs?
NRIs/OCBs are granted the following facilities:
Maintenance of bank accounts in India.
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NRI BANKING
Investment in securities/shares of, and deposits with Indian firms/ companies.
Investments in immovable properties in India.
KEY BENEFITS
NRI-Banking follows a modular structure. The various modules render our NRI Banking
solution offerings (which are stated below) in a seamlessly integrated fashion.
The Masters module permits maximum parameterization to be done, enabling the end user to
make all changes with regard to Interest Rates or with regard to any changes as per directives
from
Head
Maintains
Office
RBI.
holiday details
Facilitates maintenance of Instrument, Interest rate and overdue interest rate details Masters.
Inventory, Currency, Country, Exchange rate and return reason details are also maintained Favors
opening, authorization and freezing of Accounts Transaction entry and
Account
Aids
Day
closure,
Begin,
Preclosure,
Day
Renewal
End
&
&
overdue
renewal
Month
End
of
Deposits.
Processing
Processes Quarterly, and transfer to Inoperative & Half Yearly - SB Interest Calculation.
Hastens Deposit Receipt Printing, Changing to RFC, Interest Payment & Overdue Process.
Supports Acceptance and Execution of standing instruction.
Types of accounts
NRI accounts
are maintained by banks which hold authorized dealers' licences from the Reserve
Bank of India. Some cooperative and commercial banks have also been specifically permitted to
maintain NRI accounts in rupees even though they are not authorized dealers. The financial
budget for 2007-08 extends NRI accounts to regional rural banks (RRBs) as well. This would
boost remittances from NRIs particularly in Bihar, Kerala, Uttar Pradesh and Gujarat where a
large number of persons from rural areas from these states are employed overseas.
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NRI BANKING
Banking Laws for NRIs allow for accounts with authorized dealers to be maintained in Indian
rupees and in foreign currency.
Various accounts: NRE A/c - non residential (external) rupee account.
FCNR-B A/c - foreign currency non residential account.
NRO A/c - nonresident ordinary account.
RFC A/c - resident foreign currency account.
All NRIs can open such accounts, with the exception of individuals residing in Pakistan and
Bangladesh, who require special permission from the RBI. Joint accounts of two or more nonresidents and nomination facility are permitted.
While the FCNR (B) is a term deposit only, the NRE and NRO accounts can be operated as
either savings, current, recurring or fixed deposit accounts. As for interest rates, FCNR (B) and
NRE are subject to a cap, and should not exceed the LIBOR/SWAP rates. In the case of NRO
accounts, rates are determined by the banks. The interest rates, currently at 3.5% apply to a
period of 1 to 3 years.
The total NRE/ FCNR deposits during 2006-2007, as per RBI statistics, are USD 37,751 million
and are expected to grow with regional rural banks also mopping up funds. Banks are expected
to offer lucrative interest rates to bolster NRI funds.
Banks offer two types of accounts to NRIs, based on their reparability.
Reparable Accounts
Funds that can be transferred or repatriated abroad are maintained in a Non Resident External
Bank account. Generally, funds remitted from outside India are credited to this account.
Investments made from foreign funds can be repatriated overseas, and such investments are
maintained in a Repatriable Demat account.
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NRI BANKING
Non-Resident (External) Rupee (NRE) Accounts
Both Principal and Interest can be repatriated/transferred out of India
Savings rate on NRE accounts is at par with savings rates in resident accounts
Term deposits can be made for 1 to 3 years.
The interest rates on (NRE) Term deposits cannot be higher than LIBOR/SWAP rates as on
the last working day of the previous month, for US dollar of corresponding maturity plus 50
basis points.
The interest rates on three year deposits also apply in case the maturity period exceeds three
years. The change in interest rate also applies to NRE deposits renewed after their present
maturity period.
FCNR (B) Accounts
As in NRE accounts, both principal and interest are repatriable.
Presently, deposits can be made in 6 specific foreign currencies (US Dollar,
Pound Sterling,
NRI BANKING
immovable properties held by NRIs and PIOs.
Resident
Foreign
Currency
(RFC) Account
NRIs and PIOs returning to India can maintain an RFC account with an authorized bank in India
to transfer funds from their NRE/FCNR (B) accounts. Proceeds of assets held outside India
before their return to India can be credited to the RFC account. These funds are free from all
restrictions as to their utilization or in investment in any form outside India.
Non-Reparable Accounts
Non-repatriable funds are those which cannot be taken out of India. These have to be maintained
in a separate bank account i.e. a Non Resident Ordinary Bank account. Investments made from
non-repatriable accounts cannot be repatriated but have to be maintained in a Non-Repatriable
Demat account. Money once transferred from an NRE account to an NRO account cannot be
transferred back to an NRE account.
Non Resident Ordinary (NRO) Account
When a resident becomes an NRI, his existing savings account is designated as a Non-resident
Rupee (NRO) account.
The NRO accounts could be maintained in the nature of current, saving, recurring or term
deposits. NRIs can also open NRO accounts for depositing their funds from local transactions.
The interest earned from NRO accounts is accountable to tax laws.
NRO accounts can be opened in the name of NRIs who have left India to take up employment
or business temporarily or permanently in a foreign country.
Funds from NRO accounts are not repatriable or transferred to NRE accounts without the
prior approval of the RBI.
However, NRIs, PIOs, Foreign Nationals, retired employees or non-resident widows of Indian
citizens can remit, through the Authorized Dealer, up to USD one million per calendar year from
the NRO account or from income from sale of assets in India
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NRI BANKING
NRI BANKING
Procedures & Benefits:
Non-Resident accounts can be opened along with your remittances through banking channel.
Photograph shall be enclosed with the opening form.
There is no ceiling on the amounts remitted for your credit in Non-Resident account.
When the NRI depositor returns to India, the NRE account will be automatically treated as
Resident account. However NRE term deposit will continue to earn same rate till maturity
even after such conversion.
NRE accounts earn more interest than domestic deposits.
Nomination facilities are available for registration in favor of a non resident or resident.
Loans against deposits are allowed for purposes other than investment up to 90% of the
deposit.
The income from deposit is free from Indian Income Tax.
It is also free from Gift tax for one time gifting.
Documents Required:In case account opened in person:
Indian passport with overseas resident address or work permit (i.e. Green Card as residence
permit for USA, H1 Visa as work permit for USA or Hongkong ID card for residence of
Hongkong)
Separate proof of Non Resident status if the passport holds Indian address and resident Visa
permit is not included in passport. Photograph of individual account holder
For persons employed with foreign shipping company
Initial work contract
Last wage slip
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NRI BANKING
For contract employees
Last work contract
Letter from local agent confirming next date of joining the foreign vessel (not more than six
months from date of last return to India)
Principal's overseas address or current work contract
In case of documents sent by mail
All the relevant above mentioned documents / signatures to be attested by any one of the
following:
Indian embassy overseas notary
Local bank
Minimum balance in which one can open an account (Differs from bank to bank):NRO Saving Account Rs.5, 000/NRO - Current Account Rs.10, 000/NRO Term Deposit Account Rs.5, 000/NRE Savings Account Rs.5, 000/NRE Current Account Rs.10, 000/NRE Term Deposit Account Rs.10, 000/FCNR Term Deposit Account USD 500/- or its equivalent in GBP or Euro
If you submit the money for opening/credit to an account. Frequency of Interest payment on
accounts:
NRO Term Deposit Account Half yearly
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NRI BANKING
NRE Savings Account Quarterly
NRE Term Deposit Account Half yearly
FCNR Term Deposit Account Quarterly
Type of account
Resident Indians
Resident Indians
NRO
Yes
Yes
NRE
No
Yes
FCNR
No
Yes
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NRI BANKING
is the one
Management Act, 1999 [FEMA], which has replaced the Foreign Exchange Regulation Act ,
1973- [FERA] with effect from June 1,2000.
Person Residing outside India is the term used for an NRI, being a person who has gone out
of India or who stays outside India for the purpose of employment or carrying on business or
vocation outside India or any other circumstances which indicate his intention to stay
outside India for an uncertain period.
Section 2(v) of FEMA, 1999
Person resident in India" means
a person residing in India for more than one hundred and eighty-two days during the course of
the preceding financial year but does not include
a person who has gone out of India or who stays outside India, in either case
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NRI BANKING
(b) For carrying on outside India a business or vocation outside India, or
(c) For any other purpose, in such circumstances as would indicate his intention to stay outside
India for an uncertain period;
a person who has come to or stays in India, in either case, otherwise than
for any other purpose, in such circumstances as would indicate his intention to stay in India
for an uncertain period;
A Foreign Citizen of Indian origin residing outside India are defined as Non-Resident Indians.
NRI BANKING
F.E.M.(Deposit) Regulations define a Person of Indian Origin (PIO) as:
A person, being a citizen of any country other than Pakistan and Bangladesh,
who at any
or
2(xii) 'Person of Indian Origin' means a citizen of any country other than Bangladesh or Pakistan,
if
he or either of his parents or any of his grand- parents was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955) or
This definition is further narrowed when it comes to rules regarding acquisition and transfer of
immovable property in India. Probably with an intention of ensuring & restricting control of
immovable properties in the hands of strictly defined persons of Indian Origin only, this
definition is further narrowed to exclude individuals being citizens of Pakistan, Bangladesh, Sri
Lanka, Afghanistan, China, Iran, Nepal and Bhutan.
As regards immovable property transactions it may be noted that herein the person's father or
grandfather is included unlike parents or grandparents and spouse in earlier definition.
Accordingly a Person of Indian Origin is defined herein as:
a) Who held an Indian Passport at any time?
An individual other than citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran,
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NRI BANKING
Nepal and Bhutan, or
b) Who himself or his father or grandfather was a citizen of India.
[Regulation 2(c) of F.E.M. (Acquisition and Transfer of Immovable Property in India)
Regulation 2000]
2(c) '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
(a) At any time, held Indian passport; OR
(b) Who or either of whose father or whose grandfather was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955);
Conditions of number of days stay in India: No doubt, Foreign Exchange Management Act, 1999 definition has also incorporated an NRI's
stay of 182 days or less during a year in India, but simply speaking if a person of Indian origin
has gone out of India for settlement he is to be treated as an NRI irrespective of number of days
he has stayed in India.
Stay in India during visits:
The Act also lays down that such a person will continue to be an NRI during his visit/stay in
India provided he has not returned to India for taking up employment or carrying on business
or vacation or any other circumstances as would indicate his intention to stay in India for an
uncertain period. Accordingly, an NRI settled abroad, irrespective of the number of days stay in
India will continue to be an NRI during his visit to India provided he has not returned to India
for permanent settlement.
"Overseas Corporate Body" (OCB) means a Company, Partnership Firm, Society etc. wherein
60 % or more ownership lies with NRIs or a Trust wherein 60 % or more financial interest is
irrevocably held by NRIs.
Conclusion:
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NRI BANKING
At the cost of repetition, it is once again said that an NRI permanently settled and residing
outside India will continue to be treated as an NRI under F.E.M.A.irrespective of the number of
days of his stay in India or otherwise
CHAPTER 3-DEPOSITORY
Non-Resident (External) Account - NRE Account
Eligibility Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can open and maintain NRE
accounts with authorized dealers and with banks (including co-operative banks) authorized by
the Reserve Bank of India (RBI) to maintain
such
accounts.
The account has to be opened by the Non Resident account holder himself and not by the holder
of the power of attorney in India.
Opening NRE accounts in the names of individuals/entities of Bangladesh/Pakistan
nationality/ownership requires approval of RBI
Types of Accounts - Savings, Current, Recurring or Fixed Deposit accounts.
Debits &
Credits:
Payments for local expenses and 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.
Permitted Credits
Proceeds of personal cheques drawn by the account holder on his foreign currency account
and of travelers cheques, bank drafts payable in any permitted currency including instruments
expressed in Indian rupees for which reimbursement will be received in foreign currency,
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NRI BANKING
deposited by the account holder in person during his temporary visit to India provided the
authorized dealer/bank is satisfied that the account holder is still resident outside India, the
travelers cheques/drafts are standing/endorsed in the name of the account holder and in the
case of travelers cheques, and they were issued outside India.
Proceeds of foreign currency/bank notes tendered by account holder during his temporary
Local disbursements
Transfer to NRE/FCNR accounts of the account holder or any other person eligible to maintain
such account.
Investment in shares/securities/commercial paper of an Indian company or for purchase of
Bank.
Rate of Interest - as per the directives of the Reserve Bank of India.
Loans against Security of Funds held in the Account
For
making
in
direct
investment
real
in
estate
India
on
business).
non-repatriation
basis.
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NRI BANKING
iii)
For
acquisition
of
flat/house
in
India
for
his
own
residential
use.
In January 2007, the RBI imposed a restriction on loans against deposits and securities for NRIs
to a maximum of up to Rest. 20 lakh
To third parties
the loan should be utilized for personal purposes or for carrying on business activities (other
than agricultural/plantation activities/real estate business). The loan should not be utilized for
re-lending.
NRI BANKING
resident is not permissible.
An Account may be opened in the name of eligible NRI during his temporary visit to India.
Operation by Power of Attorney - Resident Power of Attorney holder can operate on the NRE
accounts but only for local payments to be made on behalf of the account holder. The Power
of Attorney (POA) holder cannot credit proceeds of foreign currency notes/bank notes and
travellers cheques to the NRE accounts.
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 POA holder is permitted to operate the
account to facilitate such investments. POA holders cannot, however, make gifts from NRE
accounts.
NRI BANKING
Conversion to another designated currency is permitted at a cost to the account holder.
Only term deposits can be maintained in FCNR accounts, in a time range of 6 months to 3
years.
As per RBI guidelines, banks are free to offer interest on FCNR deposits below LIBOR rates,
less 25 basis points for deposits between 6 months to one year, and LIBOR rates plus 50 basis
points for deposits over a year.
Banks are also free to decide on a fixed or a floating rate of interest on FCNR term deposits.
Interest rates are reviewed periodically and determined by directives from the Reserve Bank
(Department of Banking Operations and Development).
The account holder can choose the periodicity of interest, from half-yearly to annual payments.
The interest can be credited to a new FCNR (B) account or a NRE/NRO account.
For permissible debits and credits, the regulations for FCNR accounts are similar to the NRE
accounts.
For conversion of currencies, from designated currency to rupees and vice versa, the days rate
of conversion will apply.
Funds from the FCNR account are allowed to move within the country at no extra cost to the
account holder.
For loans and overdrafts against FCNR accounts, the same conditions as the NRE accounts
apply.
In case of premature withdrawal of the FCNR Term Deposit, a penalty is levied. Interest paid
on the account is calculated at a
1% below the committed rate if accounts are closed prematurely.
However, no interest is paid on deposits held for less than 6 months, and a penalty would have
to be paid as per directives from the apex bank. The RBI guidelines prevail on these terms,
issued as and when required.
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NRI BANKING
FCNR A/c after Change in Resident Status
NRI deposits such as the FCNR can continue till the maturity date at the contracted rate of
interest even after the account holders resident status changes to resident Indian.
However, except for interest rates and reserve requirements of FCNR deposits, these accounts
are treated as resident accounts effective from the account holders date of return to India.
On maturity, these accounts are converted to either an RFC account or the Resident Rupee
Deposit account.
As for joint accounts, the same rules as those for NRE accounts apply to FCNR deposits too.
For repatriation of funds from the FCNR account, the same conditions as those for NRE
accounts apply.
The RBI does not provide any guarantee on foreign exchange.
Other Features Reserve Bank will not provide foreign exchange guarantee.
Lending of resources mobilized by authorized dealers under these accounts are not subject to
any interest rate stipulations.
Non-Resident Ordinary Rupee (NRO) Account
Eligibility
Any person or entity residing outside India is entitled to open a NRO account with an
authorised dealer or an authorised bank for transactions conducted in Indian Rupees.
Individuals or entities of Bangladeshi or Pakistani nationality or ownership require approval
from the RBI.
Types of Accounts
NRO accounts can be opened as current, savings, recurring or fixed deposit accounts. The RBI
determines the rate of interest on these accounts and issues guidelines for opening, operating and
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NRI BANKING
maintaining them.
of
Assets
NRIs and PIO may remit upto USD One million per calendar year, out of balances held in the
NRO account which could be acquired from the sale proceeds of assets acquired in India out of
rupee or foreign currency funds or by way of inheritance from a resident Indian, provided:
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NRI BANKING
Assets acquired in India out of rupee/foreign currency funds
(a) Immovable property: NRIs and PIO may remit sale proceeds of immovable property
purchased by them when they were resident or out of Rupee
funds as NRI
or
PIO.
(b) Other financial assets: There is no lock-in period for remittance of sale proceeds of other
financial assets
Assets acquired by way of inheritance:
Sale proceeds of assets acquired through inheritance can be remitted. No lock-in period applies
here if the authorised dealer is satisfied that the proceeds are from inherited property.
Remittance of assets out of NRO account by a person resident outside India other than
NRI/PIO
a foreign national who is not a citizen of Pakistan, Bangladesh, Nepal or Bhutan and who
has retired as an employee in India,
has inherited assets from a resident Indian, or
is a widow residing outside India and has inherited assets of her deceased husband who was a
resident Indian can remit upto USD one million per calendar year on production of
documentary evidence to support the acquisition by way of inheritance or legacy of assets to
the authorised dealer.
Restrictions
The above facility of repatriation from sale of immovable property is not extended to citizens of
Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan. Remittance of sale
proceeds from other financial assets is not extended to citizens of Pakistan, Bangladesh, Nepal
and Bhutan.
Foreign Nationals of non-Indian origin on a visit to India
Foreign nationals of non-Indian origin are permitted to open a NRO account (current/savings) on
their visit to India with funds remitted from outside India through normal banking channels or by
foreign exchange brought to India. The balance in the NRO account is converted by the bank into
23
NRI BANKING
foreign currency for payment to the account holder when he leaves India, provided the account
was maintained for less than six months. The account should not be credited with any local funds
during the term, except for interest accrued on it.
Grant of Loans/ Overdrafts by Authorised Dealers/ Bank to Account Holders and Third
parties
Loans to NRI account holders and to third parties is granted in Indian Rupees by authorized
dealers (banks) against the security of fixed deposits provided:
The loans are utilized only for meeting the borrower's personal requirements or for business
and not for agricultural/plantation /real estate or relending activities
RBI regulations pertaining to margin and rate of interest will apply
All norms and considerations which apply to loans to trade and industry will apply to loans
and facilities granted to third parties.
The authorized dealer/bank may allow an overdraft to the account holder subject to his
commercial discretion and compliance with the interest rate directives.
Change of Resident Status of Account holder (a) From Resident to Non-resident
When a resident Indian leaves India for taking up employment or for carrying on business
outside India, his existing account is designated as a Non-Resident (Ordinary) Account, except in
the case of persons shifting to Bhutan and Nepal. For the latter, the resident accounts do not
change to NRO accounts.
(b) From Non-Resident
to Resident
NRO accounts may be re-designated as resident rupee accounts once the account holder returns
to India for taking up employment, or for carrying on business or for any other purpose
indicating his objective to stay in India for an uncertain period. Where the account holder is only
on a temporary visit to India, the account continues to be treated as non-resident during the visit.
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NRI BANKING
Treatment of Loans/ Overdrafts in the Event of Change in the Resident Status of the
Borrower
In case of a resident Indian who had availed of loan or overdraft facilities while resident in India
and who subsequently becomes a NRI, the authorised dealer may at its discretion allow the loan
facility to continue. In this case, payment of interest and repayment of loan may be made by
inward remittance or out of bonafide resources in India.
Payment of
The amount payable to a non-resident nominee from the NRO account of a deceased account
holder is credited to the NRO account of the nominee.
Facilities to a person going abroad for studies
Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for
all the facilities enjoyed by NRIs. All loans availed of by them as residents in India will continue
to be extended as per FEMA regulations.
International Credit Cards
Authorized dealers are allowed to issue International Credit Cards to NRIs and PIO, without the
permission of the RBI. Such transactions can be made by inward remittance or out of balances
held in the cardholder's FCNR/NRE/NRO Accounts.
Income Tax
The remittances, after payment of tax are allowed to be made by the authorized dealers on
production of a statement by the remitter and a Certificate from a Chartered Accountant in the
formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, and Government
of India
NRI BANKING
Tax @ 30% will be deducted at source on all interest income in NRO accounts.
On permanent return to India, income on all investments out of foreign exchange funds would
be eligible for a flat tax rate of 20% (excluding surcharge) till maturity of the investments.
remittances,
savings,
earnings,
investments
and
repatriation
services.
Besides the major commercial banks, certain cooperative and regional rural banks (RRB's) have
also been specifically permitted to maintain NRI accounts. This would increase NRI remittances
in Bihar, Kerala, U.P. and Gujarat where a large chunk of the rural population have settled
abroad.
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NRI BANKING
The banks also offer finance services to the NRI's that cover home loans for buying new
residential property, housing renovation loans for constructing or modifying on the existing
properties, personal loans and other loan products.
Another FDI (Foreign Direct Investment) magnet has been the various money transfer services
provided. Various banks provide quick, convenient and economical fund remit to India. These
include:
Online remittance services
Remittance of funds to partner exchange houses in India
Telegraphic or wire transfer
Fund transfer through cheques/ DD's and Travelers' cheques.
Many banks also offer Demat account services to the NRI's that enable NRI's online stock
investment and share trading services. Special NRI credit cards acceptable globally are available
with various banks. These specialized services and banking accounts have drawn enormous NRI
funds to India.
SERVICE OFFERED BY ICICI BANK:Rupee plus plan: - At ICICI Bank, we believe in providing you with the most competitive
returns on your hard earned money. Now you can earn even higher returns on your deposits by
investing in Rupee plus plan.
What does the Rupee plus plan offer you: - NRE-FD interest rates rate being regulated by
RBI, is nearly same across banks? In Rupee plus plan we have devised a way to make your
money work harder and smarter and earn higher returns in terms of NRI as compared to a NRE
FD.
Currencies: - you can being funds in any convertible currency, which will be converted to USD
(if not in USD already).
Minimum Deposit: - USD 25,000 or equivalent.
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NRI BANKING
Tenor: - for 1 year only.
How does the Rupee plus plan work? Instead of putting the money in NRE FD directly, the
money is put in USD denominated FCNR. This FCNR earns interest as per prevailing FCNR
interest rates.
Additionally, at the time of booking the FCNR a Forward Agreement is also drawn to exchange
the maturity amount of USD to Rupees at a given rate (Forward Rate).
Rupee plus plan advantage: - on an average the returns are significantly higher compared to
putting your money in NRE FD as per the prevailing market rates. Returns in rupee terms are
assured once the deal is booked irrespective of the future movements in currency markets.
The following banking facilities are available to NRIs, as per the current RBI/FEMA
guidelines.
Particulars
Foreign Currency
Non-Resident
(Non-Resident)
(External) Rupee
Account (Banks)
Account
Scheme(FCNR(B)
Scheme(NRE
Account)
NRIs/PIOs
Account)
NRIs/PIOs
account
(Non-Resident
Ordinary Rupee
Account Scheme(NRO
Account)
Any person resident
outside India (other
than a person resident
NRIs
or more NRIs
with residents
Nomination
Permitted
Permitted
Permitted
Currency in which
Pound Sterling, US
Indian Rupees
Indian Rupees
account
Joint account
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is denominated
Repatriability
Canadian Dollar
Repatriable
Repatriable
Non-repatriable*
Type of Account
Savings, Current,
Savings, Current,
Recurring, Fixed
Recurring, Fixed
Rate of Interest
Deposit
Subject to cap: LIBOR Rate of interest on
Deposit
Rate of interest on
domestic savings
domestic savings
except in case of
applicable to NRO
banks subject to
Tax Aspects
RBI
source.
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NRI BANKING
following presentation of this Draft, he/she will then receive payment.
A Demand Draft made payable to a non-Barclays account will incur a charge of Rs 3.5 per Rs
1,000 sent (minimum charge Rs 100).
A Demand Draft made payable to a Barclays account and a Foreign currency DD will incur a
flat-rate charge of Rs 300.
UAE EXCHANGE
PROVIDING speed, convenience and security of transactions, the Xpress Money Service of
UAE Exchange company is proving to be a modern and reliable way of sending and receiving
money from anywhere in the world, especially among the immigrant Indian in Gulf countries.
With an extensive network of branches in UAE and a global presence in Australia, India, Kuwait,
Oman, Qatar, UK, USA, Fiji, Sri Lanka and Bangladesh, the UAE Exchange Centre specializes
in Fund Transfer across the globe and enjoys a numerous uno status in the industry. UAE
Exchange and Financial Services Ltd makes 80,000 remittances a month. The average amount of
remittances per transfer is Rest 1, 25,000.
Western Union Money Transfer
Western Union is a global leader in money transfer services, with a history of pioneering dating
back more than 150 years. Non-resident Indians can now transfer their funds to India through the
Money Transfer Service offered by Western Union. This service is currently available for inward
remittances in India. Credits to NRE/FCNR accounts are not permitted to be routed through
Money Transfer Service Scheme (MTSS)"
SENDWISE:A rupee demand draft delivered to the recipients doorstep within three to four working days and
can be encashed at any nationalized bank in India.
MONEYGRAM Send money online today:You can send money around the world online to over 84,000 moneygram agent locations, in
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NRI BANKING
more than 170 countries. Not only is sending money with moneygram safe and convenient,
youll find the same day services to be one fastest way to send your money online-usually
arriving within minutes. Send money online or at a moneygram agent location near you.
Moneygram is a global leader in international money transfers and the largest processor of
money orders in the U.S.
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NRI BANKING
NRI BANKING
FOR NRIS INVESTMENT:In order to help the tax-payers to plan their Income-tax affairs well in advance and to avoid long
drawn and expensive litigation, a scheme of Advance Rulings has been introduced under the
Income-Tax Act, 1961. Authority for advance rulings has been constituted. The tax-payer can
obtain a binding ruling from the Authority on issues which could arise in the determination of his
tax liability. A non-resident or certain categories of resident can obtain binding rulings from the
Authority on any question of law or fact arising out of any transaction/proposed transactions
which are relevant for the determination of this tax liability.
PORTFOLIO INVESTMENT
NRIs/OCBs are permitted to make portfolio investment in shares/debentures (convertible and
non-convertible) of Indian companies, with or without repatriation benefit provided the purchase
is made through a stock exchange and also through designated branch of an authorized dealer.
NRIs/OCBs are required to designate only one branch authorized by Reserve Bank for this
purpose.
NRIS INTEREST:NRIs invested only 5% of their investible assets in India with the balance being parked overseas.
A major reason for this was that the Indian banking system was not a very preferred and trusted
mode of investment for the NRI. The customer was looking for convenience, speed, high yield
on investment with manageable risks, reasonable costs and quality services A face of India he
could associate with. Competition was not only from India based banks, but also from local
banks based overseas; conventional and non conventional routes of money transfer.
FACILITATION AGENCIES
The main regulatory and facilitation agencies involved in the matters related to NRIs/OCBs
investment are Reserve Bank of India (RBI), Securities and Exchange Board of India (SWBI),
Authority for Advance Rulings (AAR), Secretariat for Industrial Assistance (SIA), Ministry of
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NRI BANKING
Commerce and Industry; and Office of the Chief Commissioner (Investments & NRIs).
RBI FORMS
NRIs/OCBs/PIOs do not have to seek specific permission for approved activities covered under
General permission schemes. The activities relating to NRIs/OCBs/PIOs not covered under
those schemes either require declaration to RBI or permission from RBI. The activities requiring
Declaration/Permission along with corresponding forms are as under;
TS 1
FNC
IPI
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NRI BANKING
Mode of Payment
NRI BANKING
inheritance only.
Transfer / Sale:
General permission is granted for sale of any immovable property (other than agricultural land,
plantation or farmhouse property) to a person who is resident in India.
Transfer of residential or commercial property by way of gift:
General permission is granted to gift residential or commercial property to
A person resident in India, or
A person resident outside India who may be an Indian citizen or foreign citizen of Indian
origin,
Transfer of agricultural land, plantation or farmhouse property by sale/ gift
General permission is granted to sell or gift such property to a person who is resident in India
and also an Indian citizen.
Mode of Payment:-
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NRI BANKING
The payment for purchase of immovable properties is required to be made from NRI's bank
account, being:
a) Non Resident External Account (NRE);
b) Foreign Currency Non Resident (B) Account (FCNR) (B), or
c) Non Resident Ordinary Account (NRO), or
d) Foreign Exchange Inward Remittance from abroad.
All incidental expenses such as stamp duty, registration fees etc. should also be paid through
bank only.
An NRI being an Indian citizen or a foreign citizen of Indian origin is allowed to repatriate
the sale proceeds of an immovable property subject to the following conditions:
NRI BANKING
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NRI BANKING
The application for a PAN must be accompanied by:
A recent colored photograph of size 3.5 comes x 2.5 comes on the application form.
A
proof
of
residence
certificate/degree/credit
and
identity
(attested
card/voter
school
leaving/matriculation
identity/ration/passport/driving
NRI BANKING
Depository Participants or DPs offer demat account services, which would include banks.
Holding a demat account with a bank enables quick on-line dealings, ensuring credit of a
transaction to the account holders savings account by the third day. Banks have an added
advantage over other DPs with their large network of branches.
How to Open a Demat Account in India
Fill up the demat account opening form at the nearest Depository Participant
You may refer to either
CDSLathttp://www.cdslindia.com/demat_acct/open_demat.jsp or
NSDLathttps://nsdl.co.in/for the list of DPs in India.
Joint demat accounts can be opened, retaining the same order of names
Separate demat accounts have to be opened for different combinations of names in the case of
three or more joint holders.
Any number of demat accounts and DPs are permitted
A multiple-sign demat is feasible, operated by several holders
DPs charge a fee for switching shares from electronic to physical form and vice-versa, which
varies from a flat fee to a variable fee. Remit and demat charges may also show a discrepancy
between DPs.
Some DPs offer a discount to frequent traders.
It is advisable to maintain all demat accounts with the same DP to keep track of capital gains
liabilities. Different DPs follow dissimilar methods of computing the capital gains, which is
determined by the period of holding.
The charges on a demat account vary between DPs. Broadly, they are: account opening fee, an
annual folio maintenance charge paid in advance, a monthly custodian fee, and a charge on
transactions, which may either be charged every month or as a flat fee per transaction, and its
nature. Some DPs may skip the account opening fee but charge a re-opening fee for the
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NRI BANKING
account. Account holders are also subject to a service tax.
No opening balance is required for a demit account.
Supporting documents to open a demat account
Passport-size photograph
Proof of identity, address and date of birth
DP-client agreement on non-judicial stamp paper
PAN Card
The applicant receives an account number and a DP ID number which are required for all
future communication with the DP.
NRI Demat Accounts
NRIs need to fill in NRI in the type and repatriable or non-repatriable in the sub-type on the
form. No special permission from the RBI is required by NRIs to open a demat account, though
specific cases may require authorization from the designated authorised dealers.
NRIs require separate demat accounts for securities under the foreign direct investment (FDI)
scheme, which is repatriable; and the Portfolio Investment Scheme and Scheme for Investment
which can be either repatriable or non-repatriable. Repatriable and non-repatriable securities
cannot be held in a single Demit account.
Resident Indians can continue to hold non-repatriable demat accounts they hold even after they
acquire non-resident Indian status. However, when a NRI returns to India permanently, he must
inform his designated authorised dealer of his new status, and a fresh account would have to be
opened. The securities held in the NRI Demat account would have to be transferred to the new
resident demat account, and the NRI Demat account closed. The Demat account would have to
be linked with the NRIs NRO account for non-repatriable accounts and NRE accounts for
repatriable accounts to credit dividends and interest.
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NRI BANKING
Rajeev's investment details are as follows:
His combined investment in stocks and funds in the US accounts for 50% of his net assets.
Remaining 50% of his investments are in short-term deposits, again in the US. Important to note
that he does not own any residential property, either in the US or in India.
As mentioned earlier, since the client is now settled in India, and is certain to be here for the rest
of his life, in our view, it makes sense to shift his assets back to India. Why do we say that? Well,
if you know you are going to be in India, and all your future incomes and expenses are going to
be in Indian Rupees, why take on the risk of being invested in US Dollars? In case the US Dollar
were to depreciate vis-a-vis the Rupee, the value of your US assets would effectively erode. This
is not to say that no one should have money invested in other currency assets. From our
perspective, one should evaluate such investment opportunities only when one has completed
their investment plans for domestic assets. Importantly, you should have that much money in
another currency asset that is required to meet future needs (that need to be provided for in the
other currency).
In order to reallocate his assets, Sanjeev will need to liquidate his assets in the US and transfer
the proceeds to India. Since his daughter might go back to US for higher education in future he
will require money (US Dollars) at that point of time. Therefore, in his case, the liquidation and
then allocation of assets must be based on his needs in India as well as in the US.
Keeping this in mind we proposed to conduct his entire financial planning exercise in two
phases. The first phase involved understanding of his needs in India and the US and accordingly
liquidating his investments. The second phase involved, investing the proceeds in India.
Liquidation process:
We first started with liquidation of his investments in US, and for this, demarcating his needs in
India and US became the starting point for us. Since the client has no prior investments in India,
it gave us a good opportunity to define a well-diversified portfolio for him.
The next step was to decide the quantum of investment to be liquidated based on his needs. In
US, he has to continue with some of his investments for his daughter's future education. We
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NRI BANKING
found that around 10% of the client's total wealth will be sufficient for this purpose and rest he
can liquidate. Thus, we advised him to liquidate 90% of his total investments in US.
The next step was to transfer the proceeds to India. Normally, people who have foreign currency
(in this case US Dollar) get apprehensive about the exchange rate at which their proceeds are to
be transferred. In this particular case, since the client is already settled in India, we advised him
not to pay much heed to the exchange rate and instead start transferring the funds.
NRI BANKING
pure risk cover plan that enables the individual to opt for a high insurance cover at relatively
lower premiums.
First and foremost, it needs to be executed (investing in mutual funds, buying property) and then
the plan needs to be monitored regularly. This is necessary as over time, Rajeev's risk profile will
change, as he gets older, he may not be comfortable with a higher allocation to equity, so a
portion of his money will have to be shifted to lower risk assets. Also the performance of the
mutual fund schemes will have to be monitored. Given the nature of the task, it is best for Rajeev
that he engages the services of a professional and competent financial planner
CHAPTER 9-CONCLUSION
NRI Banking today stands as one of the most profitable business for banks. With India having
one of the largest NRI populations and a very prosperous one too, NRI banking is one hot
business no bank can afford to ignore today. India needs foreign exchange reserves for its
developing economy. Realizing this, banks are shaping up their strategies in order to attract this
NRI money. Further with India pushing for Capital Account Convertibility, and the success of
Pravasi Bharatiya Diwas, prospects for NRI banking has never been so good than today.
Deposits can be broken before the maturity period but the interest payable would be the
applicable interest rate prevailing for that period at the time of opening the deposit. The
minimum period for NRE and FCNR would be 1 year. A penalty charge as applicable will be
levied.
Yes. The mandate facility is available for NRI customers. The mandate form duly completed
(with Form 60 or PAN card, proof of identity, proof of address, and photo) may be handed
over to the branch when the account is opened to authorize a person in India to operate the
account. This is possible only in the case of savings accounts.
Yes. However, you may consider doing so only on maturity of the deposit so that there is no
loss of interest.
Deposits are value dated. The date will be the date on which the funds are received by
Barclays (India) in its Nostrum accounts.
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NRI BANKING
A NRI can remit up to USD 1 million (or equivalent) per calendar year for any bonfire
purpose subject to payment of tax and furnishing the required documents.
The International ATM-cum-Debit card offers Rest 50,000 of cash withdrawal per day and
transactions worth Rest 50,000 at merchant establishments.
There are no withdrawal charges for cash withdrawn from any VISA ATM network across the world.
For purchases and ATM transaction(s) outside India there is a 2.5% currency conversion charge, at
all VISA enabled POS and ATM machines. Service Tax (currently 12.36%) on these charges will be
levied. For details of charges on Domestic debit cards, kindly refer the schedule of charges for
Consumer banking.
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