NRI Banking – An Introduction:As per RBI guidelines, the residential status of an Indian changes to that of theNo n - R e s i d e n t , i n t h e e ve n t o f h i s s t a y a b r o a d b e i n g mo r e t h a n 1 8 3 d a ys .
T h i s p e r i o d o f 1 8 3 d a ys i s n o t a p p l i c a b l e i n c e r t a i n c a s e s l i k e g o i n g o ve r s e a s f o r employment or business. It is mandatory to inform the bank of your change of your residential status.With a view to attract the savings and other remittance into India through bankingchannels from the person of Indian Nationality / Origin who are residing abroadand bolster the balance of payment position, the Government of India introduced in1970 Non-Resident(External) Account Rules which are governed by the ExchangeControl Regulations. The funds held in Non-Resident (External) Accounts (NREAccounts) qualify for certain benefits like exemptions from taxes in India, freerepatriation 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 ForeignNational of Indian Origin resident outside India for purposes of employment,carrying on business or vocation in circumstances as would indicate an intention tostay outside India for an indefinite period. An individual will also be consideredNRI 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 Indiaintroduced in 1970 NonResident (External) Account Rules which are governed bythe 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 outsideIndia. Students studying abroad are also treated as NRIs.Indian
would be eligible. The benefits envisaged under the Schemeinclude:-
. businessor on any vocation is a Non-Resident. Besides making their journey back to their roots simpler.citizen who stays abroad for an indefinite period on employment.Chennai) would do the same. 1935 and other territories that became part of India thereafter providedneither was at any time a citizen of any of the aforesaid countries (as referred toin 2(b) above). The fee for the card.this Scheme entitles the PIOs to a wide range of economic. Diplomats posted abroad. easier and smoother. The Card would be issuedto eligible applicants through the concerned Indian Embassies/HighCommissions/Consulates and for those staying in India on a long term visa. would be US$1000. except for a few specified countries. Persons of Indian Originu p t o t h e f o u r t h g e n e r a t i o n ( g r e a t g r a n d p a r e n t s ) s e t t l e d t h r o u g h o u t t h e wo r l d .In this scheme. persons posted inUN Organizations and Officials deputed by PSU on temporary assignments arealso treated as Non-residents
PIO CARD SHCEME The Government has launched a comprehensive Scheme for the Persons of IndianOrigin-called the ‘PIO Card Scheme’. Under this Scheme.educationaland cultural benefits.Bangladesh and other countries as may be specified by the Central Governmentfrom time to time) if. or He/she is a spouse of a citizen of India or a person of Indian o r i g i n c o ve r e d under (i) or (ii) above. Calcutta. or He/she or either of his/her parents or grandparents or great grandparents wasborn in and permanently resident in India as defined in the Government of IndiaAct. He/she at any time held an Indian passport. unless the context otherwise requires-"Person of Indian origin" means a foreign citizen (not being a citizen of Pakistan. theconcerned Foreigners Regional Registration Officer (Delhi. financial. Mum bai. which will have a validity of 20years.
All future benefits that would be extended to NRIs would also be available tothe PIO Card holders. t h e n registration is required to be done within a period of 30 days of the expiry of 180days. IITs. However.No requirement of visa to visit India. societies and other corporate bodies whichare owned. financial. transfer and disposal of immovable properties in Indiaexcept of agricultural/plantation properties.
What is an OCB? Overseas Corporate Bodies (OCBs) are bodies predominantly owned byi n d i vi d u a l s o f I n d i a n n a t i o n a l i t y o r o r i g i n r e s i d e n t o u t s i d e I n d i a a n d i n c l u d e overseas companies. holding. Parity with Non-Resident Indians in respect of facilities available to the latter ineconomic. directly or indirectly. they shall not enjoy political rights in India.including medical/engineering colleges. Admission of children in educational institutions in India under the generalcategory quota for NRIs. Various housing schemes of Life Insurance Corporation of India. IIMs etc. These facilities ill include: Acquisition. No requirement to register with the Foreigners Registration Officer if continuouss t a y d o e s n o t e x c e e d 1 8 0 d a y s . educational fields etc. StateGovernments and other Government agencies. I f c o n t i n u o u s s t a y e x c e e d s 1 8 0 d a y s . S u c h o wn e r s h i p i n t e r e s t s h o u l d b e a c t u a l l y h e l d b y t h e m a n d
. to the extent of at least 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which atl e a s t 6 0 % o f t h e b e n e f i c i a l i n t e r e s t i s i r r e vo c a b l y h e l d b y s u c h p e r s o n s . partnership firms.
n o t i n t e c a p a c i t y a s nominees.S B I n t e r e s t Calculation. Interest rate and overdue interest rate detailsMasters. enabling theend user to make all changes with regard to Interest Rates or with regard to anyc h a n g e s as per directives from Head Office / R B I . Maintains Bank. The various modules render our NRIBanking solution offerings (which are stated below) in a seamlessly integratedfashion. Exchange rate and return reason details arealso maintainedFavors opening.Hastens Deposit Receipt
. passing and stop payment of cheques. Currency. The various facilities granted to NRIs are also available with certainexceptions to OCBs so long as the ownership/beneficial interest held in them byNRIs 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. Branch and holiday detailsFacilitates maintenance of Instrument. authorization and freezing of AccountsTransactione n t r y a n d p a s s i n g i s m a d e e a s y Provisions availed for issuing.A i d s Day Begin.Supports Account closure. Investment in securities/shares of. a n d t r a n s f e r t o I n o p e r a t i ve & H a l f Y e a r l y . Inventory. Day End & Month End P r o c e s s i n g P r o c e s s e s Q u a r t e r l y. and deposits with Indian firms/ companies. Investments in immovable properties in India. Preclosure. Renewal & overdue renewal of Deposits.The Masters module permits maximum parameterization to be done. 13
NRI BANKING KEY BENEFITSNRI-Banking follows a modular structure. Country.
NRO A/c.Printing. The financial budget for 2007-08 extends NRIaccounts to regional rural banks (RRBs) as well. Various accounts:NRE A/c. J o i n t accounts of two or more non-residents and nomination facility are permitted.Supports Acceptance and Execution of standing instruction. FCNR-B A/c. Uttar Pradesh and Gujarat where a largenumber of persons from rural areas from these states are employed overseas.
NRI BANKING Types of accounts NRI accounts are maintained by banks which hold authorized dealers' licencesfrom the Reserve Bank of India . RFC A/c.non resident ordinary account. Some cooperative and commercial banks havealso been specifically permitted to maintain NRI accounts in rupees even thoughthey are not authorized dealers.While the FCNR (B) is a term deposit only. current. recurring or fixed deposit accounts. the NRE and NRO accounts can beoperated as either savings. Kerala.resident foreign currency account.non residential (external) rupee account. This would boost remittancesfrom NRIs particularly in Bihar. Changing to RFC. with the exception of individuals residing in P a k i s t a n a n d B a n g l a d e s h .foreign currency non residential account.All NRIs can open such accounts. Interest Payment & OverdueProcess. Banking Laws for NRIs a l l o w f o r a c c o u n t s w i t h a u t h o r i z e d d e a l e r s t o b e maintaine d in Indian rupees and in foreign currency. As for 15
. wh o r e q u i r e s p e c i a l p e r mi s s i o n f r o m t h e R B I .
Investments made from foreign funds can be repatriatedoverseas. The interest rates on (NRE) Term deposits cannot be higher than LIBOR/SWAPr a t e s a s o n t h e l a s t w o r k i n g d a y o f t h e p r e v i o u s m o n t h . and such investments are maintained in a Repatriable Demat account. Generally. currently at 3. as per RBI statistics. Non-Resident (External) Rupee (NRE) Accounts
Both Principal and Interest can be repatriated/transferred out of India Savings rate on NRE accounts is at par with savings rates in resident accounts Term deposits can be made for 1 to 3 years. funds remitted from outside India arecredited to this account.751 million and are expected to grow with regional rural banks also mopping upfunds.5% apply to a period of 1 to 3 years. based on their reparability. are USD37.The total NRE/ FCNR deposits during 20062007. Repatriable Accounts Funds that can be transferred or repatriated abroad are maintained in a NonResident External Bank account. f o r U S d o l l a r o f corresponding maturity plus 50 basis points. FCNR (B) and NRE are subject to a cap. rates are determined by thebanks. Banks are expected to offer lucrative interest rates to bolster NRI funds. In the case of NRO accounts.Banks offer two types of accounts to NRIs.NRI BANKING interest rates. and should not exceed theLIBOR/SWAP rates.The interest rates on three year deposits also apply in case the maturity periode xc e e d s t h r e e ye a r s . The interest rates. T h e c h a n g e i n i n t e r e s t
Japanese Yen. deposits can be made in 6 specific foreign currencies (US Dollar. The term of deposits can range between 1 to5 years. S a vi n g s N RO a c c o u n t s a r e n o r m a l l y o p e r a t e d t o c r e d i t r u p e e i n c o me f r o m shares.
NRI BANKING FCNR (B) Accounts As in NRE accounts. EURO. 17
. Presently. etc.Fixed or floating within the limits of LIBOR/SWAP rates for therespective currency/corresponding term minus 25 basis points (except JapaneseYen).r a t e a l s o a p p l i e s t o N RE d e p o s i t s renewed after their present maturity period.Pound Sterling. In case of term deposits. interest. both principal and interest are repatriable. Interest rate. NRO Accounts Only current earnings are repatriable. Australian Dollar and Canadian Dollar). rent from property in India. banks are allowed to determine their own interest rates.
Non Resident Ordinary (NRO) Account When a resident becomes an NRI. Proceeds of assets held outside India before their return to India can be credited to the RFCa c c o u n t . Money oncetransferred from an NRE account to an NRO account cannot be transferred back toan NRE account. his existing savings account is designated as aNon-resident Rupee (NRO) account. Non-Repatriable Accounts Non-repatriable funds are those which cannot be taken out of India.
. Resident Foreign Currency (RFC) Account NRIs and PIOs returning to India can maintain an RFC account with an authorizedbank in India to transfer funds from their NRE/FCNR (B) accounts. Th e s e f u n d s a r e f r e e f r o m a l l r e s t r i c t i o n s a s t o t h e i r u t i l i z a t i o n o r i n investment in any form outside India. Investments made from nonrepatriable accounts cannot be repatriated buthave to be maintained in a Non-Repatriable Demat account. e . These have tob e m a i n t a i n e d i n a s e p a r a t e b a n k a c c o u n t i . This limitincludes the sale proceeds of immovable properties held by NRIs and PIOs.NRI BANKING Banks can allow remittance up to USD 1 million per financial year for bonafidepurposes from balances in the NRO accounts once taxes are paid out. a N o n R e s i d e n t O r d i n a r y B a n k account.
NRO accounts can be opened in the name of NRIs who have left India to take upemployment or business temporarily or permanently in a foreign country. r e t i r e d e m p l o ye e s o r n o n . s a v i n g . 18
NRI BANKING The interest earned from NRO accounts is accountable to tax laws.H o we ve r .
. NRI s . recurring or term deposits. NRIs can also open NRO accounts for depositingtheir funds from local transactions.r e s i d e n t widows of Indian citizens can remit. Funds from NRO accounts are not repatriable or transferred to NRE accountswithout the prior approval of the RBI.The NRO accounts could be maintained in the nature of c u r r e n t . Fo r e i g n Na t i o n a l s . P I O s .
through the Authorized Dealer. Indian Embassy/consulate Any person known to the Bank Notary public Any of our offices abroad 19
NRI BANKING You can open NRE Saving Bank a/c / Current Accounts
. Passport copy Visa/residence permit 2 photographs initial money remittance Your signature may be verified by anyone of the following. up to USDone 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 theaccount opening formand mail it tothe branch of your choice along with .
It is also free from Gift tax for one time gifting
. There is no ceiling on the amounts remitted for your credit in NonResidentaccount. Photograph shall be enclosed with the opening form. Loans against deposits are allowed for purposes other than investment up to90% of the deposit. When the NRI depositor returns to India. However NRE term deposit will continue to earnsame rate till maturity even after such conversion. NRE accounts earn more interest than domestic deposits.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 Attorneyor Letter of AuthorityNomination Facility available (Nominee can be a resident Indian also) Procedures & Benefits: NonR e s i d e n t a c c o u n t s c a n b e o p e n e d a l o n g wi t h yo u r r e m i t t a n c e s t h r o u g h Banking channel. the NRE account will be automaticallytreated as Resident account. The income from deposit is free from Indian Income Tax. Nomination facilities are available for registration in favor of a non resident or resident.
e.Documents Required:In case account opened in person: Indian passport with overseas resident address or work permit (i. Photograph of individual accountholder For persons employed with foreign shipping company Initial work contract Last wage slip For contract employees Last work contract Letter from local agent confirming next date of joining the foreign vessel (notmore than six months from date of last return to India) Principal's overseas address or current work contract 21
NRI BANKING In case of documents sent by mail
. Green Card asresidence permit for USA. H1 Visa as work permit for USA or Hongkong ID cardfor residence of Hongkong)Separate proof of Non Resident status if the passport holds Indian addres s andresident Visa permit is not included in passport.
Current Account – Rs.000/NRE – Term Deposit Account – Rs.5.10.5.000/NRO – Term Deposit Account – Rs.000/NRE – Savings Account – Rs. Frequency of Interestpayment on accounts: NRO – Term Deposit Account – Half yearly NRE – Savings Account – Quarterly NRE – Term Deposit Account – Half yearly 22
.10.or its equivalent in GBP or EuroIf you submit the money for opening/credit to an account.000/FCNR – Term Deposit Account – USD 500/.All the relevant above mentioned documents / signatures to be attested by anyone of the following: Indian embassy overseas notary Local bank Minimum balance in which one can open an account (Differs from bank tobank):-NRO – Saving Account – Rs.10.5.000/NRE – Current Account – Rs.000/NRO .
FCNR – Term Deposit Account – Quarterly Opening of JOINT ACCOUNTS:T y p e o f a c c o u n t J o i n t A c c o u n t w i t h Resident IndiansJoint Account withNon-Resident Indians N R O Y e s Y e s N R E N o Y e s F C N R N o Y e s 23