NRI BANKING

PROJECT REPORT OF
MARKETING OF BANK

UNIVERSITY OF MUMBAI

BACHALOR OF COMMERCE
(BANKING AND INSURANCE)
SEMISTER V
2014-15

SUBMITTED BY
Shilpa S. Trivedi

PROJECT GUIDE
MS

GHANSHYAMDAS SARAF COLLEGE

OF ARTS AND COMMERCE
R.S Campus, S.V road,
Malad (west),Mumbai-400 064
B.COM (BANKING AND INSURANCE) 5TH SEMISTER

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 NRI BANKING

ACKNOWLEDGEMENT

I take this opportunity to thank the UNIVERSITY OF MUMBAI for

giving me a chance to do this project.

I express my sincere gratitude to the Principal; Chief Co-ordinator Mrs. Urvi Madam,
Guide Prof. Gurunathan S. Pillai and our librarian and other teachers for their constant
support and helping for completing the project.

I am also grateful to my friends for giving support in project. Lastly,

I would like to thank each and every person who helped me in completing the
especially MY PARENTS.

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 NRI BANKING

DECLARATION

I MS. SHILPA SURESH TRIVEDI a student of Ghanshyamdas Saraf

College of Arts and Commerce, Malad (w) T.Y.B.C.B.I (SEMESTER V)

HEREGY DECLARE THAT I HAVE COMPLETED PROJECT ON ‘NRI BANKING

in the academic year 2013-2014. This information

Submitted is true and original to best of my knowledge.

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 NRI BANKING

CHAPTER TOPIC NAME PAGE

NO NO

01 INTRODUCTION ON NRI 09
BANKING:- 10
Who is an Nri? 11
Pio card scheme 13
What is an OCB? 14

Key benefits 15

Types of accounts 19

Opening of NRI A/c

02 DEFINATION:-
Definition of NRI – under Foreign 24
Excange Management Act,1999

Defination of PIO 27

03 DEPOSITORY’S SCHME FOR

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 NRI BANKING

NRI’S:- 30

NRE A/c 30

Types of Accounts 34

FCNR A/c 36
NRO A/c 41
Tax Benefits for NRI’s
04 SERVICES OFFERED BY VARIOUS
BANK TO NRI’S:-
Banking Services 43
Services offered by ICICI Bank
44
Facility available as per RBI/FEMA
45
guidelines
05 RBI ISSUES GUIDELINES FOR
MONEY TRANSFER SCHEME:-
48
Money transfer
49
International SWIFT transfer
49
Demand (or bankers) draft
50
UAE Exchange
50
Wester union Money Transfer
50
Sendwise
51
Moneygram send money online today
52
ICICI & HDFC bank NRI money
transfer
06

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 NRI BANKING

52
NRI INVESTMENTS:-
55
Investment opportunities in India for
NRI

RBI forms
07 NRI INVESTMENT IN
IMMOVABLE PROPERTY IN
INDIA:-
56
Rules for acquisition 7 transfer by
foreign citizen NRI’s
58
Mode of payment
59
Repatriation of sale proceeds

08 PAN CARD FOR NRIs:-

Applying for pan card, necessity for 60
pan card,charges of pan card

Demat a/c 62

CASE STUDY ON NRI 66

CONCLUSION 70

ANEXXURE 71

FINDINGS AND SUGGESTION 72

BIBLIOGRAPHY 74

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 NRI BANKING

CHAPTER 1.
NRI Banking – An Introduction:-

INTRODUCTION bank of your change of your residential status.

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

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 NRI BANKING

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 Officials deputed by PSU on

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 NRI BANKING

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, 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, 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

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 NRI BANKING

 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, educationaland 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 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:

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 NRI BANKING

 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

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 NRI BANKING

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 te capacity as nominees. The various
facilities granted to NRIs are also available with certain
exceptions to OCBs so 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.

 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

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 NRI BANKING

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 Office / RBI.
Maintains Bank, Branch and 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 maintainedFavors opening,
authorization and freezing of AccountsTransaction entry and passing
is made easy
Provisions availed for issuing, passing and stop payment of
cheques.

Supports Account closure, Preclosure, Renewal & overdue renewal

of Deposits.
Aids Day Begin, Day End & Month End 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.

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 NRI BANKING

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.

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 - non resident 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

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 NRI BANKING

non-residents 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.

Repatriable 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.

Non-Resident (External) Rupee (NRE) Accounts

 Both Principal and Interest can be repatriated/transferred out of

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 NRI BANKING

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, EURO, Japanese Yen,
Australian Dollar and Canadian Dollar).

 Interest rate- Fixed or floating within the limits of

LIBOR/SWAP rates for the respective currency/corresponding term
minus 25 basis points (except Japanese Yen).

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 NRI BANKING

 The term of deposits can range between 1 to5 years.

NRO Accounts

 Only current earnings are repatriable.

 Savings NRO accounts are normally operated to credit rupee
income from shares, interest, rent from property in India, etc.

 In case of term deposits, banks are allowed to determine their

own interest rates.

Banks can allow remittance up to USD 1 million per financial

year for bonafide purposes from balances in the NRO accounts
once taxes are paid out. This limit includes the sale proceeds
of 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

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 NRI BANKING

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-Repatriable 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

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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

OPENING OF NRI ACCOUNT

HOW TO OPEN NRI ACCOUNTS WITH A BRANCH IN

INDIA
To open an NRE account please complete the account opening
form and mail it to the branch of your choice along with ;

 Passport copy
 Visa/residence permit

 2 photographs

 initial money remittance

Your signature may be verified by anyone of the following;

 Indian Embassy/consulate
 Any person known to the Bank

 Notary public

 Any of our offices abroad

You can open

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 NRI BANKING

 NRE Saving Bank a/c / Current Accounts

 Fixed Deposits in Indian Rupees

 Fixed Deposits in Foreign Currency

 NRO accounts (Rupee accounts for crediting income in India )

You can authorize a resident to operate your account through a Power of Attorney or
Letter of Authority

Nomination Facility available (Nominee can be a resident Indian

also)

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.

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 NRI BANKING

 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

For contract employees

 Last work contract

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 NRI BANKING

 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.

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 NRI BANKING

Frequency of Interest payment on accounts:

NRO – Term Deposit Account – Half yearly

NRE – Savings Account – Quarterly

NRE – Term Deposit Account – Half yearly

FCNR – Term Deposit Account – Quarterly

Opening of JOINT ACCOUNTS:-

Type of account Joint Account with Joint Account with

Resident Indians Non-Resident
Indians

NRO Yes Yes

NRE No Yes

FCNR No Yes

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CHAPTER 2.

DEFINITION

NRI definition- under Foreign Exchange Management Act, 1999

Definition of an NRI :

Introduction:

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An Indian abroad is popularly known as an NRI – but the

same has two important definitions - one coined under the
Foreign Exchange Management Act, 1999 – [FEMA] and the
other as per the Income Tax Act, 1961.

FEMA definition:

The most relevant definition concerning an NRI's various bank

accounts and investments in movable and immovable properties in
India is the one provided by Foreign Exchange 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

(a) for or on taking up employment outside India, or

(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 or on taking up employment in India, or

 for carrying on in India a business or vocation in India, or

 for any other purpose, in such circumstances as would indicate

his intention to stay in India for an uncertain period;

(a) any person or body corporate registered or incorporated in

India,

(b) an office, branch or agency in India owned or controlled

by a person resident outside India,

(c) an office, branch or agency outside India owned or

controlled by a person resident in India;

2(w) "person resident outside India" means a person who is not

resident in India;

Non Resident Indian, the phrase is for the first time defined

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 NRI BANKING

in the regulations as “a person resident outside India who is

either a citizen of India or a person of Indian Origin".
Recently RBI has clarified that students studying abroad also be
treated as NRIs under FEMA and accordingly be eligible for
foreign investments and NRE/FCNR a/cs

And the definition of "a person resident outside India " is

simply put as " a person who is not Resident in India."

NOW, reading both the definitions together, it can be

summarized that both:

 an Indian Citizen residing outside India and also

 a Foreign Citizen of Indian origin residing outside India are

defined as Non-Resident Indians.

Person of Indian Origin:

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 time held an Indian
Passport. or

 a person who himself or either of his parents or any of his

grandparents were citizens of India, or

 a spouse of an Indian citizen, or

 a spouse of a person covered under (i) or (ii) above.

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 NRI BANKING

2(xii) 'Person of Indian Origin' means a citizen of any country

other than Bangladesh or Pakistan, if

 he at any time held Indian passport; or

 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

 the person is a spouse of an Indian citizen or a person

referred to in sub-clause

Person of Indian Origin (PIO) defined under Regulations re:

Immovable Property in India:

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

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 NRI BANKING

Lanka, Afghanistan, China, Iran, 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:

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 NRI BANKING

 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.

2(xi) " Overseas Corporate Body (OCB)" means a company,

partnership firm, society and other corporate body owned directly
or indirectly to the extent of at least sixty per cent by Non-
Resident Indians and includes overseas trust in which not less
than sixty per cent beneficial interest is held by Nonresident
Indians directly or indirectly but irrevocably.

Conclusion:

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.

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 NRI BANKING

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 NRI BANKING

CHAPTER 3

DEPOSITORY’S
SCHEM

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

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 NRI BANKING

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 remittances to India can be in any permitted

currency.
 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, 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

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 NRI BANKING

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 visit to India, provided
(i) the amount was declared on a Currency Declaration Form (CDF), where
applicable, and
(ii) the notes are tendered to the authorized dealer in person by the account
holder himself and the authorized dealer is satisfied that account holder is a
person resident outside India.

Permitted Debits

 Local disbursements
 Remittances outside India

 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 immovable property in India within
prescribed regulations.

 Any other transaction if covered under general or special

permission granted by the Reserve Bank.

Rate of Interest - as per the directives of the Reserve Bank

of India.

Loans against Security of Funds held in the Accou

 To the account holder

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 NRI BANKING

i) For personal purposes or for carrying on business activities

(except agricultural/plantation activities/investment in real estate
business).
ii) For making direct investment in India on non-repatriation
basis.
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 Rs.
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.
 Loans outside India

Authorized dealers may allow their overseas branches/correspondents

to grant fund based and/or non-fund based facilities to Non
Resident depositors against the security of funds held in the
NRE accounts and also agree to remittance of funds from India
if necessary, for liquidation of debts.

 Change of Resident Status of Account Holder

NRE Accounts should be re designated as resident account or

the funds held in these accounts may be transferred to the
Resident Foreign Currency (RFC) Accounts (if the account holder

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 NRI BANKING

is eligible for maintaining RFC Account) at the option of the

account holder immediately upon the return of the account
holder to India (except where the account holder is on a short
visit to India).

Repatriation of funds to Non Resident Nominee can be permitted

by the authorized dealer or bank in the case of an account
holder who is deceased.

Other Features -

 Joint Accounts - in the names of two or more Non Resident

individuals may be opened provided all the account holders are
persons of Indian nationality or origin. When one of the joint
holder become residents, the authorized dealer may either delete
his name or allow the account to continue as NRE account
or redesignate the account as resident account at the option of
the account holders. Opening of these accounts by a Non
Resident jointly with a 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.

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 NRI BANKING

 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.

Foreign Currency (Non-Resident Indians) FCNR (B) Account

Eligibility to Open and Maintain FCNR A/c

 With the exception of persons of Indian origin from Bangladesh

and Pakistan, all NRIs and PIOs are eligible to maintain an
FCNR account with an authorised bank in India.
 Accounts may be opened with funds remitted from outside,
existing NRE/ FCNR accounts, etc.

 Remittances should be in the designated currency.

 Conversion to currency other than the designated currency also

permitted at the risk and cost of the remitter.

Features of FCNR Account

 The account can be opened with funds remitted from abroad,

or transferred from an existing NRE/FCNR account.
 FCNR accounts can be opened with designated currencies, which

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 NRI BANKING

are: GBP, USD, Deutsche Mark, Japanese Yen and the Euro.

 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 day’s 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.

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 NRI BANKING

 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.

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
holder’s 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 holder’s 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

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 NRI BANKING

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
maintaining them.

Joint Accounts with Residents/Non-residents

Joint accounts are permitted with resident and non-residents.

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 NRI BANKING

Permissible Credits/Debits -
Credits -

 Remittances from outside India through normal banking channels

received in freely convertible foreign currency.
 Any freely convertible foreign currency can be deposited into
the account during the account holder's visit to India. Foreign
currency exceeding USD 5000/- or its equivalent in the form
of cash has to be supported by a Currency Declaration Form.
Rupee funds must be supported by an Encashment Certificate,
if they are funds brought from outside India.

 Current income earned in India, such as rent, dividend, pension

or interest. Even proceeds from sale of assets including
immovable property acquired out of rupee or foreign currency
funds or through inheritance.

Debits -

 All payments towards expenses and investments in India

 Payment outside India of current income like rent, dividend,
pension, interest etc. in India of the account holder.

 Repatriation up to USD One million, per calendar year, for all

bonafide purposes with the approval of the authorised dealer.

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 NRI BANKING

Remittance 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:

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

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 NRI BANKING

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 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

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 NRI BANKING

/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

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 NRI BANKING

during the visit.

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 funds to Non-resident/Resident Nominee

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

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 NRI BANKING

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, Government of India

TAX BENEFITS for NRIs

 Interest on NRE & FCNR deposits are free of income tax.

 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

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 NRI BANKING

investments.

CHAPTER 4

SERVICES OFFERED BY
VARIOUS BANK TO
NRI’S

BANKING SERVICES

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 NRI BANKING

NRI banking services including deposits, savings accounts, finance

like home loans, personal loans etc. Various banks like ICICI
Bank, Citibank, HDFC Bank and many other nationalized and
private banks that hold authorized dealer's licenses from the
Reserve Bank of India (RBI) provide 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.

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

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 NRI BANKING

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.

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.

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 NRI BANKING

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 a 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.

Foreign
Non-Resident (Non-Resident
Currency (Non-
(External) Ordinary Rupee
Resident)
Particulars Rupee Account Account
Account (Banks)
Scheme(NRE Scheme(NRO
Scheme(FCNR(B)
Account) Account)
Account)
Who can open NRIs/PIOs NRIs/PIOs Any person
an account resident outside
India (other than
a person resident
in Nepal and
Bhutan)
Joint account In the names In the names May be held
of two or of two or jointly with
NRIs more NRIs residents

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 NRI BANKING

Nomination Permitted Permitted Permitted

Currency in Pound Sterling, Indian Rupees Indian Rupees

which account US Dollar, Jap.
is denominated Yen or Euro.
Australian Dollar,
Canadian Dollar
Repatriability Repatriable Repatriable Non-repatriable*

Type of Account Term Deposit Savings, Savings, Current,

only Current, Recurring, Fixed
Recurring, Fixed Deposit
Deposit
Rate of Interest Subject to cap: Rate of interest Rate of interest
LIBOR minus on domestic on domestic
25 basis points savings account savings account
except in case will also be will also be
of Japanese Yen applicable to applicable to
where the cap NRE savings NRO savings
would be based account. For account. For
on at the Fixed Deposits, Fixed Deposits,
prevailing LIBOR the rates can the rates can
rates be fixed by be fixed by
banks subject banks subject to
to ceilings ceilings prescribed
prescribed by

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 NRI BANKING

RBI by RBI

Tax Aspects Interest income Interest income Interest income

tax free and no tax free and taxable and
tax deduction at no tax liable for TDS
source. deduction at @30% plus
source. applicable
surcharge subject
to conditions.
DTAA benefit
may be available
subject to
fulfillment of
conditions.

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 NRI BANKING

CHAPTER 5

RBI issues guidelines for

money transfer scheme

MONEY TRANSFER

Money can be transferred either through on line or drafts or telegraphically or by

wire transfer or Cheques. E-Transfer is completely online, paperless money transfer
service which enables the customer to send money directly from one bank account
in foreign country to India. Drafts in Indian rupees can be purchased from exchange

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 NRI BANKING

companies of one country and mailed to the branch of another country where the
customer has the account. Telegraphic or wire transfers can be made through branch
to branch. Cheques can be deposited for credit of the customer’s accounts and the
Cheques will be collected and credited to their accounts.

International SWIFT Transfer

This is a secure, quick and efficient method of transferring

funds, which enables you to send money easily to any bank
which is part of the SWIFT network. There is a flat-rate
charge of Rs 500 for each SWIFT transfer made from your
account. There is no charge when you make a transfer from
your Barclays NRI account in India to a Barclays account in
UK or UAE.

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 NRI BANKING

Demand (or Banker's) Draft

This is a means of initiating a transfer from your account to

a named payee. You can send the Demand Draft to your
intended payee, who will then be able to take the Draft into
their bank – 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

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 NRI BANKING

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 Rs
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 recipient’s doorstep within

three to four working days and can be encashed at any
nationalized bank in India.

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 NRI BANKING

MONEYGRAM Send money online today:-

You can send money around the world online to over 84,000
moneygram agent locations, in more than 170 countries. Not only
is sending money with moneygram safe and convenient, you’ll
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. We help people and
business by providing affordable, reliable and convenient payment
services.

ICICI Bank NRI Money Transfer:-

ICICI Bank, the leading bank in India offering financial

services to the NRI community through NRI saving account, NRE
Accounts, Fixed Deposit, FCNR deposits, and the quickest way to
send money online to India.

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 NRI BANKING

CHAPTER 6

NRI INVESTMENTS

The Government of India has adopted a liberal policy, with

respect to investment by NRIs and OCBs in India, such
investment are allowed, both, through the RBI route and also
through the Government route, i.e., through the Foreign Investment
Promotion Board (FIPB) NRIs and OCBs are permitted to invest
up to 100% equity in real estate development activity and civil
aviation sectors. Investment, made by the NRIs and OCBs, are
fully repatriable, except in the case of real estate, which has a
3 year lock-in period on original investment and, 16% cap on
dividend repatriation.

Various investment opportunities in India available to NRIs:-

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 NRI BANKING

 If one is NRI, the following investment opportunities are open

to you:
 Maintenance of bank accounts in India.

 Investment in securities/shares and deposits of Indian

firms/companies.

 Investment in mutual funds in India.

Investment Policy for Non-resident Indians (NRIs):-

Recognizing the investment potential of the Non-resident Indians, a

number of steps are being taken by the government on an
ongoing basis to attract from them in Indian companies. Some
of the investment schemes presently available to Non-resident
Indians (NRIs) include the facility to invest upto 100 percent
equity with full benefits of repatriation of capital invested and
income accruing thereon in high priority industries mentioned in
the Annexure-III to the industrial policy 1991, 100 percent export
oriented units, sick units under revival, housing and real estate
development companies, etc,. NRIs/PIOs/OCBs are also permitted to
make portfolio investments through secondary markets. In terms of
the relaxations announced in 1998-99, investment limits for an
individual NRI has been revised upwards from 1% to 5%,

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 NRI BANKING

aggregate portfolio investment limits by all NRIs increased from

55 to 10% of the issued and paid-up capital of the company.
The aggregate investment limit would be separate and exclusive
of FII portfolio investment limits.

FOR NRI’S 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

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 NRI BANKING

this purpose.

NRI’S 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 Commerce and Industry; and Office
of the Chief Commissioner (Investments & NRIs).

RBI FORMS

NRIs/OCBs/PIOs do not have to seek specific permission for

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 NRI BANKING

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 Transfer of Shares/Debentures by Non-residents to Residents

1

FNC Permission to establish a branch office in India by an

1 Overseas Company establishing a Representative Office by
Overseas Company for Liaison Activities to open a
Project/Site Office in India.

IPI Company/Individual (declaration) acquiring property

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 NRI BANKING

CHAPTER 7

NRI Investment In
Immovable Property In
India

NRIs, irrespective of their citizenship can freely acquire and

transfer residential as also commercial properties in India barring
agricultural land and plantation, with repatriation of foreign
exchange equivalent of cost of acquisition (maxi. two in case of
resi.houses) and no restrictions as regards holding period.

 Rules for Acquisition & Transfer by NRIs being:

 Indian citizen & Foreign citizen

 Mode of Payment

 Joint Holding / Restrictions

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 NRI BANKING

 Repatriation of Sale Proceeds

 Taxation of Capital Gains & Wealth-Tax

Rules for Acquisition & Transfer by Foreign Citizen

NRIs

Purchase / Acquisition:

There is a general permission to acquire any immovable

property (other than agricultural land, plantation or farm-house
property) by way of purchase, provided the payment is made out
of foreign exchange inward remittance or any Non Resident bank
account in India, i.e.NR(E),FCNR(B) or NRO a/c..

Acquisition by way of Gift:

General permission is granted to acquire any immovable

property (other than agricultural land, plantation or farmhouse
property) by way of gift from a person (donor) who is

 A person resident in India, or

 Aperson resident outside India (an NRI )who is Indian
citizen or foreign citizen of Indian origin.

Acquisition by way of inheritance :

General permission is granted for inheritance of

immovable property including agricultural land, plantation or farm-

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 NRI BANKING

house property from

 A person resident in India, or

 A person resident outside India who may be an Indian citizen
or foreign citizen of Indian origin provided such person had
acquired said property in accordance with the provisions of
Foreign Exchange Law in force at the time of acquisition. i.e.
FERA, 1973 or FEMA 1999.

Hence Agricultural land, plantation or farmhouse property

can be acquired by way of 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

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 NRI BANKING

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 :-

 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.

 It is advisable to retain records of payment made i.e. banker’s

certificate

 All incidental expenses such as stamp duty, registration fees

etc. should also be paid through bank only.

Repatriation of Sale proceeds

 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:

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 NRI BANKING

a) . the acquisition should be in accordance with the existing

Foreign Exchange Laws (i.e. FERA, ‘73 or FEMA ‘99).

b) the purchase price was met out of Foreign Exchange Inward

Remittance or NRE / FCNR (B ) account, and

c) in case of residential properties, repatriation is restricted to a

maximum of two properties.

It may be noted that the eligibility criteria of

holding period of 3 years for repatriation is removed w.e.f. 29-
06-02.[ vide notification no FEMA 65/2002 RB dated 29-06-02.]4

 It may be noted that there are no restrictions as re:

repatriation of sale proceeds vis-a-vis number of commercial or
industrial properties.
 The amount of repatriation is restricted to foreign exchange
equivalent of the purchase price i.e. profits / gains are not
allowed to be repatriated.

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CHAPTER 8

PAN Card for NRIs

For all Indian citizens who are liable to pay tax under
the Income Tax Act, 1961, or are required to enter into
financial transactions in India, it is mandatory to have a
Permanent Account Number.

The Permanent Account Number (PAN) is a combination of 10

alphanumeric numbers issued by the Income Tax Department. The
Department has entrusted UTI Investor Services Ltd. (UTIISL) with
the task of managing IT PAN Service Centers wherever the IT
department has an office in the country. The National Securities
Depository Limited (NSDL) has also been engaged to allot PAN
cards from TIN Facilitation centers.

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Applying for a PAN

Form 49A, which is the application form for a PAN, can be

downloaded from the Income Tax, UTIISL and NDSL websites:
www.incometaxindia.gov.in & www.utiisl.co.intin.nsdl.com

The forms care also available at the IT PAN Service Centers

and TIN Facilitation Centers. A “tatkal” or priority service has
been provided for, to enable speedy allotment of the PAN card
through the Internet. The PAN is allotted through e-mail on
priority in 5 days as against the normal 15 days to the
applicant upon online payment through a credit card. The PAN
has lifetime validity.

The necessity for a PAN Card to NRIs

Apart from income returns which must carry the PAN, it is

mandatory to submit the PAN in all financial transactions, like
the purchase and sale of property in India, payments for
purchase of vehicles, foreign visits, securing a telephone
connection or making time deposits in a bank worth over
Rs.50,000.

For NRI’s, PAN is necessary to conduct monetary transactions in

India, invest in stocks, and pay tax on their Indian income.

The application for a PAN must be accompanied by:

 a recent colored photograph of size 3.5 cms x 2.5 cms on

the application form .
 a proof of residence and identity (attested school

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leaving/matriculation certificate/degree/credit card/voter

identity/ration/passport/driving license/telephone/electricity bill/employer
certificate .

 code of the concerned Assessing Officer of the IT Department

obtainable from the IT office where form is submitted .

DEMAT ACCOUNT :-

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A demat account facilitates buying and selling shares, precluding

cumbersome paperwork and meaningless delays.

Advantages of a Demat Account -

 It is a safe, secure and convenient mode of transacting in

shares.
 Minimizes brokerage charges

 Ensures immediate liquidity

 Removes uncertainty on ownership title of securities

 Allows quick allotment of public issues

 Enables smooth process in pledging shares

 Avoids delays due to wrong/incorrect signatures, post, and

misplacement of certificates

 Prevents risks like forgery and counterfeit, theft or damage to

documents

 Saves on stamp duty, paperwork on transfer deeds

 Gives immediate benefits from bonus shares and stock splits

Who offers Demat Facility?

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 holder’s savings account by the third day. Banks

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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. Remat 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

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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 account. Account holders are also subject to a service tax.

 No opening balance is required for a demat 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.

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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 Demat 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
NRI’s NRO account for non-repatriable accounts and NRE accounts
for repatriable accounts to credit dividends and interest.

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CASE STUDY ON NRI BANKING

Increasingly at Personal we are meeting Indians living abroad

who are relocating to India. Usually such individuals have a
significant portion of their assets in the foreign country;
investments in India are usually linked to inheritance or savings
made before shifting abroad

The task we are entrusted with is to help such individuals plan

their finances. Here's how we assisted one such family.

We recently met a Person of Indian Origin (PIO) who was

based in the United States (US); he has now shifted permanently
to India. Let's call this individual Rajeev.

Almost all of rajeev's savings are in the US; in US mutual

funds and bonds. He has no exposure to India in his asset
allocation, although he does expect to inherit some Indian assets
over time.

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 More about Rajeev -

He is 44 years of age and was settled in US for many years

before relocating to India

He is married and has a 8-yr old daughter

Although he is not sure, there is a likelihood that his daughter

might want to go back to US for further studies

 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

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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.

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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
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.

 Asset allocation based on the client's needs in India:

Given that the client has no investment in property (he was

living in a rented premise), the top priority was to invest in a
property. About 40% of his assets were allocated for the
purpose. Given the hype about property, Sanjeev was keen to
consider a higher exposure; however we recommended otherwise.
In our view, and this holds true for most individuals, the
number of properties you own should be linked to your 'real'
needs i.e. property which you need to give as inheritance or
property for self use.

The fact that the client is financially very sound and in a

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position to take some risk, we recommended that he invest upto

35% of the surplus in well-managed diversified equity funds in
a disciplined manner based on his needs and objectives. The
portfolio consisted of no more than six schemes.

Equities as an asset class are best equipped to generate high

returns over longer time frames (3-5 years). Thus, his investment
in equities should be well equipped to cater his future needs
such as his daughter's marriage, his retirement planning or any
other need as and when required.

Another 10% of the surplus cash inflows could be invested in

debt funds (short-term debt funds, as at present interest rates are
on the rise). Inclusion of debt funds in the portfolio will ensure
that the portfolio becomes well diversified across asset classes.

The balance (5%) could be maintained in liquid assets for any

immediate requirement or for contingency.Rajeev was also advised
to take up a term insurance policy for himself. This is a pure
risk cover plan that enables the individual to opt for a high
insurance cover at relatively lower premiums.

It goes without saying that our recommendation to Rajeev

(although very critical) was just a starting point. 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

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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 who
can actively monitor his financial plan

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.

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PRIMARY DATA QUESTIONARIES :-

VISITED ICICI BANK ANDGERI BRANCH

MET MR. KALPESH DHANJI MOTA

ANNEXURE :-

Can I break my deposit before the maturity period?

If I am visiting India, can I use travelers cheques or currency
to open an account or credit my existing NRE Account?

Can any person in India be authorised to operate the NRI's

account?

Can an FCNR deposit in one currency be converted to a

deposit in another currency

Can FCNR/NRE deposits be value dated?

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How much money can an NRI remit abroad annually from his
NRO accounts?

Can an NRI repatriate sale proceeds of his property purchased

by him by remittance from abroad?

What is the frequency of interest payment in an NRE savings

account?

What is the limit on the international ATM-cum-Debit card for

NRI customers?

What are the charges applicable for debit card?

Can I repatriate money out of balances held in my NRO

accounts?

FINDINGS & SUGGESTIONS :-

Yes.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.
Travelers cheques can be used to credit/open the account. If
you are bringing foreign currency notes & travellers cheques,

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you will have to submit a Currency Declaration Form (CDF)

to the Customs authorities on arrival in India if the foreign
currency notes exceed USD 5,000 or travellers cheques and
notes exceed USD 10,000. You must produce the CDF for
endorsement by the bank when you submit the money for
opening/credit to an account.

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 authorise
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 Nostro
accounts.

A NRI can remit up to USD 1 million (or equivalent) per

calendar year for any bonafide purpose subject to payment of
tax and furnishing the required documents.

Yes. However the amount repatriated should not exceed the

amount

paid for acquisition i.e.

Amount received in foreign exchange through normal banking

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channel
The foreign currency equivalent as on date of payment of
amount paid by debit to NRI a/c

The frequency of interest payment would be half yearly.

The International ATM-cum-Debit card offers Rs 50,000 of cash

withdrawal per day and transactions worth Rs 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.

Interest earnings can be repatriated. In addition to this,

remittance/s up to USD 1 million per calendar year from
balances in NRO accounts subject to payment of applicable
taxes is allowed.

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Bibliography

Website

www. Google.com
www.icici.com

www.google.com

www.wikipedia.com

Books/Journal

Nri Banking
Articles in Newspapers

Libraries referred

College library

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