Banking Accounts

1. What accounts can an NRI open in India?

Ans.

NRI can open and hold bank accounts in India with AD or AD Bank. The AD in India may accept deposits from NRI under the following schemes:

         i.        Non-Resident (External) Account Scheme (NRE A/c) in Indian Rupees

        ii.        Non-Resident (Ordinary) Account Scheme (NRO A/c) in Indian Rupees

       iii.        Foreign Currency (Non-Resident) Account Banks Scheme (FCNR (B) A/c) in Foreign Currency

       iv.        Special Non-Resident Rupee Account (SNRR A/c) in Indian Rupees


  Features of above schemes available to NRIs is tabulated below:

Particulars

(Refer Notes below)

FCNR A/c

NRE A/c

NRO A/c

SNRR A/c

Who can open an account?

NRI & Person of Indian Origin (PIO)

 

Any person resident outside India for putting through bonafide transactions in rupees

Any person resident outside India

who has business interest in India for the purpose of putting through bonafide transaction in rupees

Type of Account

Term Deposit only

Savings, Current, Recurring, Fixed Deposit

Savings, Current, Recurring, Fixed Deposit

Current (same nomenclature as specified business)

Repatriation

Freely repatriable

Freely repatriable

Current income is freely repatriable, provided all taxes are duly paid.

 

Other balances in NRO A/c are remittable upto USD 1 million per FY, subject to payment of applicable taxes.

Repatriable subject to payment of applicable taxes

Taxability of interest earned

Exempt under section 10(15)(iv) (fa) of the Act

Exempt under section 10(4) of the Act

Taxable

Not an interest bearing account

Currency

 

Any permitted currency i.e. Foreign Currency which is freely convertible

Indian Rupees

Rate of

Interest

Rate of interest are in the accordance with the directions issued by the RBI from time to time

Not an interest bearing account.

Change in residential status

Non-resident to resident:

FCNR (B) deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by the account holder.

 

AD should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC A/c (if the depositor is eligible to open RFC A/c), at the option of the account holder.

Non-resident to resident:

NRE A/cs should be re-designated as resident A/cs or the funds held in these accounts may be transferred to the RFC A/cs (if the A/c holder is eligible to open RFC A/c), at the option of the account holder immediately upon return of the account holder to India for good. Where the account holder is only on a short visit to India, the account may continue to be treated as NRE account even during his stay in India

Non-resident to resident:

NRO A/cs may be designated as resident rupee A/cs upon return of the account holder for good.

 

Resident to Non-resident:

When a resident Indian becomes a person resident outside India, his existing resident account should be designated as NRO A/c.

Non-resident to resident:

SNRR A/c may be designated as resident rupee A/c upon return of the account holder to India for good.


Note 1: NRI means a person resident outside India who is a citizen of India

Note 2: A ‘Person of Indian Origin (PIO)’ is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:

a.  Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or

b.  Who belonged to a territory that became part of India after the 15th day of August, 1947; or

c.   Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or

d.  Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)

A PIO will include an ‘Overseas Citizen of India’ cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955. Such an OCI Card holder should also be a person resident outside India.

Note 3: Opening of accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh shall require prior approval of RBI, subject to certain exceptional cases (Refer FAQ 2 below)

  Note 4: The tenure of SNRR account shall be concurrent to tenure of the business operation and in no case, it shall exceed 7 years (subject to certain exceptions as mentioned in FAQ 18 and 19). Approval of RBI shall be obtained in cases requiring renewal.

2. Can a Bangladeshi/ Pakistani national or an entity owned/ controlled from Bangladesh/ Pakistan have a bank account in India?

Ans.

Opening of bank accounts by individuals/ entities of Pakistan nationality/ ownership and entities of Bangladesh ownership requires prior approval of RBI.

However, individuals of Bangladesh nationality can open an NRO A/c subject to the individual(s) holding a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned.

Further, citizens of Bangladesh/Pakistan belonging to minority communities in those countries, namely, Hindus, Sikhs, Buddhists, Jains, Parsis and Christians residing in India and who has been granted Long Term Visa (LTV) or whose application for LTV is under consideration by Central Government, are permitted to open only one NRO A/c with AD, subject to certain conditions.

3. NRI holds NRO, NRE and FCNR (B) A/c with an AD Bank. He intends to add his sister a resident Indian as a joint holder. Is it permissible?

Ans.

Yes. NRO A/c can be maintained jointly with a resident of India on former or survivor basis. On the other hand, NRE and FCNR (B) A/c can be maintained jointly only with resident relative(s) (i.e. a resident non-relative cannot be a joint holder).  

4. As per FAQ 3, who all are covered under relative?

Ans.

“Relative” means and cover the following:

1.    Members of Hindu Undivided Family

2.    Spouse

3.    Father (including step- father)

4.    Mother (including step-mother)

5.    Son (including step- son)

6.    Son’s wife

7.    Daughter

8.    Daughter’s husband

9.    Brother (including step- brother)

10. Sister (including step-sister) 


5. Whether 2 or more NRI / PIOs jointly hold NRE/NRO/FCNR (B) A/cs in India?

Ans.

Yes

6. Can the NRI’s sister as mentioned in FAQ 3 operate his Bank accounts?

Ans.

The sister who is resident relative joint holder shall be eligible to operate NRE and FCNR(B) A/c, only if she is a Power of Attorney (POA) holder as per the instructions of the NRI brother.

Further, the AD Bank may allow operations in FCNR (B), NRE and NRO A/c as per the terms of the POA, provided such operations are restricted to the following:

·    Withdrawals for permissible local payments including payments for eligible investments subject to relevant compliances

·        Remittance to the account holder himself (i.e. NRI in this case) through normal banking channels. However, in case of NRO A/c, remittance of only current income (net of taxes) shall be permitted.

·         Payment by way of gift to resident on behalf of NRI A/c holder shall not be permitted

·         Transfer of funds from one account to another NRE, FCNR(B) or NRO account shall not be permitted

7. Whether a resident POA holder can open NRE A/c on behalf of NRI account holder?

Ans.

No. NRE A/c cannot be opened by resident POA holder in India on behalf of NRI.

8. Are NRIs permitted to be joint holders in accounts held by resident Indians?

Ans.

Yes. NRIs who are relatives (as mentioned in FAQ 4) are permitted to be joint holders in resident bank accounts with the resident account holder on “Either or Survivor” basis, subject to fulfilment of other conditions as prescribed.

9. Can NRI account holders avail Rupee loans in India from Banks against security of funds held in their FCNR (B) and NRE A/c?

Ans.

Yes. NRIs can avail loan from Banks for himself against the collateral of funds held in FCNR (B) and NRE A/c without any ceiling subject to usual margin requirements. However, the loan amount can be utilized by NRI only for the following purposes:

·     Personal purposes or for carrying on business activities. The loans cannot be utilized for the purpose of relending or for carrying on agriculture, plantation activities or for investment in real estate business.

·     Capital contribution in Indian firms / companies on non-repatriation basis, subject to relevant regulations.

·     Acquisition of flat / house in India for his ‘own’ residential use, subject to relevant regulations.

10. Can a resident third party avail loan against the collateral of fixed deposits held in NRE/ FCNR (B) A/c?

Ans.

Loan can be availed in favor of third party i.e. resident individuals (RI)/firms/company in India against the security of fixed deposits held in the NRE/ FCNR (B) A/c. However, such funds shall be utilized for following purposes:

·         Personal purposes or for carrying on business activities. The loans cannot be utilized for the purpose of relending or for carrying on agriculture, plantation activities or for investment in real estate business

·    There should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the RI/firms/company to obtain such facilities.

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

11. Can NRIs avail loans outside India against security of funds held in their FCNR (B) / NRE A/c?

Ans.

Yes. NRIs can avail loan from branches/correspondent bank outside India in his favor or request the branch/correspondent bank outside India to provide loan to a third party outside India. The loan amount should be utilized for bonafide purposes.

12. Can NRI account holders avail Rupee loans in India from Banks against security of funds held in their NRO A/c?

Ans.

Yes. Under FEMA regulations, loan can be availed in favor of the A/c holder (NRI in this case) or to third party i.e. RI/Firms/Company in India against the security of fixed deposits held in NRO A/c. The loan can be utilized for personal and business purposes except for the purpose of relending or for carrying on agriculture, plantation activities or for investment in real estate business.

13. Can NRI avail loan outside India against security of funds held in NRO account?

Ans.

No. Loan outside India against security of funds held in NRO account is not permitted.

14. Can NRI overdraw his NRE A/c?

Ans.

AD Banks may at their discretion/ commercial judgment allow over drawings in NRE A/c up to a limit of Rs. 50,000/- subject to the condition that such over drawings together with the interest payable thereon are cleared/repaid within a period of 2 weeks, out of inward remittances through banking channels or by transfer of funds from other NRE/ FCNR (B) A/c.

15. Upon the death of NRI account holder, whether remittance of funds to NRI /resident nominee is permissible?

Ans.

Yes. Remittance of funds of deceased account holder to NRI nominee is permissible. However, request from a resident nominee for remittance of funds outside India for meeting the liabilities, if any of deceased account holder or for similar other purpose, prior RBI approval shall be required.

16. What are permissible transactions in NRE A/c and FCNR (B) A/c:

Ans.

Permissible Credits

Permissible Debits

·       Remittances to India in any permitted currency

·       Personal cheques drawn, traveller’s cheques, bank drafts in permitted currency

·       Proceeds of foreign currency/bank notes during temporary visit to India   

·       Transfers from other NRE/ FCNR (B) A/c

·       Interest accruing on the funds held in the account

·       Current income in India (subject to tax payment)

·       Maturity proceeds of any permissible investment originally made from NRE/ FCNR (B) A/c or through inward remittance.

·       Refund of share/ debenture subscriptions of to new issues of Indian companies if original subscription was made from NRE/FCNR (B) A/c or through inward remittance.

·       Refund of application/ earnest money/ purchase consideration on non-allotment/cancellation from builder/ developer (with interest) provided original payment was made from NRE/FCNR (B) A/c or through inward remittance.

·       Any other credit if covered under general or special RBI permission

·       Local disbursements

·       Remittances outside India

·       Transfer to NRE/ FCNR (B) A/c 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 as permitted in specific regulations on the subject.

·       Any other transaction if covered under general or special RBI permission

 

17. What are the permissible transactions in NRO A/c:

Ans.

Permissible Credits

Permissible Debits

·     Proceeds of remittances received in any permitted currency from outside India

·     Permitted currency tendered during his temporary visit to India or transfer from Rupee accounts

·     Legitimate dues in India

·     Transfers from other NRO accounts

·     Any amount received in accordance with rules and regulations under FEMA

 

·     All local payments in rupees including payments for investment subject to compliance with RBI regulations

·     Remittance outside India of current income in India of the account holder net of applicable taxes

·      Transfers to other NRO A/c

·      Settlement of charges on International Credit Card issued by AD Banks (subject to limits for repatriation)

18. What can be covered as business interest as mentioned in FAQ 1 to open SNRR account?

Ans.

It covers all generic business interest and shall also include the following transactions as specified by RBI in relevant rules/regulations:

·         Foreign Investment in India and other investments as applicable

·         Import and Export of Goods and Services

·         Trade credit transactions and lending under External Commercial Borrowings (ECB)

·         Business related transactions by IFSC units at GIFT city

19. What are conditions and permissible transactions in SNRR A/c:

Ans.

·    Any person resident outside India who has business interest in India for the purpose of putting through bonafide transaction in rupees. However, opening of SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh requires RBI prior approval.

·    The SNRR A/c should carry the nomenclature of the specific business for which it is in operation and balances in such A/c should commensurate with the operations.

·     The operation of such A/c shall not result in the account holder making available foreign exchange to a resident of India against reimbursement in rupees.

·   The debits and credits in SNRR A/c shall be specific/ incidental to the business proposed to be done by the account holder and will be subject to payment of applicable taxes.

·     Transfers from NRO A/c to SNRR A/c are prohibited.

·    The tenure of SNRR A/c shall be concurrent to the tenure of contract/ period of operation/ business of the account holder and in no case the period should exceed 7 years from the date of opening of the A/c, subject to RBI approval. However, the restriction of 7 years shall not be applicable to SNRR A/c opened for purposes as mentioned in FAQ 18.

·      Transactions in SNRR A/c should be reported to RBI as per directions issued.

20. Whether AD Banks may allow customers to open separate SNRR A/c?

Ans.

Yes. The AD Banks may, at its discretion, maintain separate SNRR A/c for each category of transactions for the account holder engaged in multiple categories of transactions, provided it is able to identify/segregate and account them category-wise.


                                                                                                                                                                                                              - Updated 10/2023