NRI Deposit Accounts.

INTRODUCTION

In terms of the Foreign Exchange Management Act (FEMA), 1999 a person resident outside India means a person who is not resident in India. What are the different types of accounts which can be maintained by an NRI / PIO in India? If a person is NRI or PIO, s/he can, without the permission from the Reserve Bank, open, hold and maintain the different types of accounts given below with an Authorized Dealer in India, i.e., a bank authorized to deal in foreign exchange. NRO Savings accounts can also be maintained with the Post Offices in India. However, individuals/ entities of Bangladesh and Pakistan require the prior approval of the Reserve Bank.

Types of accounts which can be maintained by an NRI / PIO in India

A. Non-Resident (Ordinary) Rupee Account (NRO Account) B. Non-Resident (External) Rupee Account (NRE Account) C. Foreign Currency Non Resident (Bank) Account FCNR (B) Account
D. Non-Resident (Special) Rupee (NRSR)Account E. Non-Resident (Non-reportable) Rupee (NRNR)Deposit Account

. Facilities to returning NRIs/PIO Returning NRIs/PIO may continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was acquired, held or owned when resident outside India

Foreign Currency Account A person resident in India who has gone abroad for studies or who is on a visit to a foreign country may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India, provided that on his return to India, the balance in the account is repatriated to India. However, short visits to India by the student who has gone abroad for studies, before completion of his studies, shall not be treated as his return to India. A person resident in India who has gone out of India to participate in an exhibition/trade fair outside India may open, hold and maintain a Foreign Currency Account with a bank outside India for crediting the sale proceeds of goods on display in the exhibition/trade fair. However, the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair.

Resident Foreign Currency Account Returning NRIs /PIOs may open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account to transfer balances held in NRE/FCNR(B) accounts. Proceeds of assets held outside India at the time of return, can be credited to RFC account. The funds in RFC accounts are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form outside India. RFC accounts can be maintained in the form of current or savings or term deposit accounts, where the account holder is an individual and in the form of current or term deposits in all other cases.

THEREFORE, Non Resident Indian (NRI) is a person resident outside India, who is a citizen of India or is a person of Indian origin. A Person of Indian Origin (PIO) for this purpose is defined in Regulation 2 of FEMA Notification ibid as a citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held Indian passport; or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b). Close relative' means relative as defined in Section 6 of the Companies Act, 1956. A Person of Indian Origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sir Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held an Indian Passport or (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

Is the permission of the Reserve Bank required for opening the various accounts, mentioned above, by Bangladesh / Pakistan individuals/entities? Opening of accounts by individuals/entities of Bangladesh / Pakistan nationality requires prior approval of the Reserve Bank. All such requests may be referred to the Chief General Manager-in-Charge, Foreign Exchange Department, Foreign Investment Division, Reserve Bank of India, Central Office, Mumbai - 400 001. Can an individual resident borrow money from his close relatives outside India? Yes, an individual resident can borrow sum not exceeding USD 250,000 or its equivalent from his close relatives staying outside India, subject to the conditions that: i) the minimum maturity period of the loan is one year; ii) the loan is free of interest; and iii) the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the NRI.

Non Resident Ordinary Rupee Account What is NRO account?

A NRO (Non-Resident Ordinary) account is a rupee denominated account. Foreign currency which you wish to deposit is converted to Indian rupees at the time of money is deposited into the account. NRO account is for NRIs who are having income (like rent, dividend, pension) in India and to make local payments in Indian Rupees for their genuine needs in India. Features Of NRO Account: Funds in a NRO account will be maintained in Indian Rupees. Source of funds into NRO accounts can only contain funds received from within India. NRIs can open this account jointly with an Indian resident or with another NRI. Funds can be transferred from an NRO account to an NRO / Resident account. Funds cannot be transferred from an NRO account to an NRE account. Interest in NRO account are taxable. Repatriability is subject to conditions (That is, converting funds to any foreign currency) Power of attorney holder can operate the account ( that is, Power of attorney can make local, rupee

payments on behalf of the NRI ) NRO account is converted into a regular resident account if NRI returns to India permanently.

Remittance of funds held in NRO accounts: Repatriation out of NRO accounts is not permitted as per the FEMA regulations. However the same are permissible provided the following documentation is submitted: I. Declaration from customer. II. CA certificate.

Joint Accounts NRO accounts can be held jointly with resident Indians or non-residents. The documentation for the joint resident holder is the same as the documentation and identification of a resident account holder. Power of attorney: Power of attorney are allowed for NRO accounts. Format to be same as existing one for Resident Accounts. However, the POA can open and close your account and can also do outward remittance. Rate of interest: Interest payable on NRO accounts will be at the same rates as on residents accounts at present. This, however, is subject to change at banks direction.

Non Resident External Rupee Account (NRE) Following are the salient features of such accounts: The amounts in such accounts are fully and freely Repatriable These accounts are designated in INR INR Cash Deposits in such accounts are not allowed Joint Accounts with residents are not allowed (Joint with Non Residents are allowed) Power Of Attorney Allowed (though the POA cannot repatriate money abroad and hence SWIFT transfers / FX DD requests cannot be initiated by POA holders) Interest is exempt from taxes (No TDS) Source of Funds for Account opening: Fresh Inward Remittances Transfer from Another NRE/FCNR Account in the same name FX Cash or TCs in customers deposited by customer in person Permissible Credits to account Since NRE account is FREELY REPATRIABLE, credits to NRE accounts need to be monitored by the Bank. Credit transaction in NRE account has been set up as an exception on Finacle and hence every credit transaction in a NR account will require Supervisors approval. Designated departments to ensure that only the following kind of credits are permitted for NRE Savings Account a) Proceeds of remittances to Indian Proceeds of remittances to India in any of the permitted currency. The credit to the NRE account will be in INR after converting the currency at the TTB rate prevailing for the day. In case the transaction amount is INR 100000.00 or above equivalent, then from A4 (Refer Annexure#6) to be available. The same can be signed ob behalf of the customer by the bank officer, if required b) Foreign check bank drafts collection Foreign check collection of checks drawn of foreign currency accounts. FX checks collection to handle as per the existing resident customers.. Also in case the transaction amounts is INR 100000.00 or above equivalent, then form A4 to be available. The same can be signed on behalf of the customer by the bank officer, if require Travelers checks, in permitted currencies deposited by the account holder in person during his temporary visit to India. AD to accept the TCs after checking the following: TCs needs to be issued in the name of the account holder. TCs should have been issued by Bank Overseas. If the total amount of currency notes and travelers checks tendered for credit to NRE accounts exceeds USD 5,000 or its equivalent, CSE to take a copy of the Currency Declaration Form (CDF) ( Refer Annexure 3). Customer would have submitted the CDF (with the Customs) at the time of the account holders arrival into India. TCs to be discharged in presence of Bank officer The above limit of USD 10,000/USD 5,000 is per customer and hence in case of joint holders of an account (2 holders) the above limit shall be USD 20,000 and USD 10,000 respectively

In case the amount mentioned on the CDF is exhausted, the original CDF to be retained by the Bank In case the transaction amount is INR 100000.00 or above equivalent, then from A4 to be available. The same can be signed on behalf of the customer by the bank officer, if required

c) Foreign currency/bank notes Foreign currency/bank notes tendered by account holder during his temporary visit to India can be credited to the NRE accounts. VGPBE to ensure the following: Foreign currency / notes should be tendered by the account holder in person only If the amount of foreign currency notes tendered exceeds U.S.$5000/- or its equivalent or the total amount of currency notes and travelers cheques tendered for credit to NRE accounts exceeds U.S.$ 10000 or its equivalent. CSE to take a copy of the Currency Declaration Form (CDF) Customer would have submitted the CDF at the time of the account holders arrival into India. VGPEB to update the CDF and endorse the amount being availed by the customer. The above limit of USD 10000 /USD 5000 is per customer and hence in case of joint holders of an account (2 holders) the above limit shall be USD 20000 and USD respectively

Maturity proceeds of Government securities including National Plan / Saving Certificates as well as proceeds of Government securities and units of mutual funds sold on a recognized stock exchange in India and sale proceeds of units received from mutual holders NRE ?FCNR account or out of remittances received from outside India. The customer to submit the cherub encashment certificate to substantiate the purchase transaction. d) refund of share / debentures subscription to new issue of Indian companies: If the amount of subscription was paid from the same account or from outside India. The customer to submit the cheque encashment certificate/ FIRC to substantiate the same. In case the investment as done through a Bank in India, then the customer needs to inform the original pertaining to cases of part allotments, the customer to substantiate that original debit was from an NRE/FCNR account. If, however, the counterfoil of the check states the RBI repatriation number, then no further proof is required to be submitted by the customer. e) Refund of application / earnest money Refunds of application/earnest money made by the house building agencies on account of non-allotment of flat / plot, together with interest, provided the original payment was made out of the NRE / FCNR account of the account holder or remittance from outside India through normal channels. The customer to submit the cheque encashment certificate/FIRC to substantiate the same. For above transactions refer checklist as per Annexure#3. Incase a customer is not able to provide documentary evidence to substantiate the above transaction. Signed declaration as per. Annexure 9 to be taken Permissible Debits to account a) Inward clearing checks

Inward clearing checks drawn on the NRE account. There is no monitoring required for Inward clearing checks drawn on the NRE SB accounts. Form A4 in case the amount involved is Rs.100000.00 or above equivalent is required to be completed by the clearing supervisor. These transactions can be identified during technical scrutiny of checks b) Outward SWIFT remittance

Customer can request for outward SWIF remittance / FCY Demand drafts from NRE SB Account. CSE to ensure that following documents are submitted by the customer: Form A2 Request letter FEMA Declaration VGPBE to forward the request to Branch OPS for processing. Branch OPS to debit the customers account for the INR amount and transfer the funds to WCS as per the existing process and the existing timelines. In case interest/maturity proceeds for NRE/FCNR term deposits needs to be repatriated, From A2 can be completed and signed by a Bank officer c) Intra Bank transfer request Customer can transfer to NRE/NRO SB account or can give request ot book a FCNR account. Refer to the section on Treasury timelines. Reparability Principal (valid only for NRE Term Deposits) and interest is freely Repatriable for NRE Accounts. Joint accounts 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 NRE ACCOUNTS CANNOT BE OPENED JOINTLY WITH RESIDENT INDIANS. Operations by power of attorney Power of attorney will be allowed for NRE account. The documentation to be same as existing process. POAs are allowed to transact on the accounts. However the following shall not be allowed to be executed by a POA: Outward Remittance (by TT/SWIFT or by FCY DD) Account Opening (Term or TA) Account Closure Tax Exemption Income from interest on balances standing to the credit of NRE Accounts is exempt from Income Tax. Likewise balances held in such accounts are exempt from wealth tax.

Foreign currency non-resident bank (FCNR b)

What is Foreign Currency Non-resident Bank Deposits: FCNR-B Accounts?

NRIs can avoid Risk of Foreign Exchange fluctuations by keeping their overseas money in Foreign Currency Non Resident Bank Deposits (FCNR-B) and you can convert back money to the foreign currency. The account should be opened by the non-resident account holder. FCNR-B enable NRIs to earn good returns on their foreign currency earnings Foreign Currency Non-Resident Account. It is maintained in foreign Currency viz., US Dollar (USD), Pounds Sterling (GBP), Euro Currency (EUR) and Japanese Yen (JPY), but only as fixed deposits. The Principal and Interest earned thereon are reparable. This account facility is available to NRIs to invest in India in foreign currency to take advantage of the higher rate of interest offered by the bank.

Key Features of FCNR-B (Foreign Currency Non Resident Bank Deposits) accounts FCNR(B) accounts are maintained in Foreign currency only No interest is paid if the deposit is broken before 365 days. Term Deposits in USD, GBP, and EURO for the period from 1 year to 3 years can be opened.

Remittances in other Currencies will be converted into any of the three currencies named above at the option of the depositor. Any subsequent change will be at the cost of the Depositor. Interest is payable in the same currency of the deposit at Half yearly. FCNR account can be opened jointly with other non-residents. Nomination facility is available. FCNR a/c can be converted or amount transferred to NRE, NRNR, and ONR accounts. Repayment of Deposit and interest thereon are allowed to be repatriated outside India. No loss due to exchange rate fluctuations. No interest shall be paid on deposits which are pre-closed before expiry of minimum period of ONE YEAR. For deposits having maturities over one year, if they are prematurely closed/withdrawn or renewed 1% interest shall be deducted from the rate applicable, for the actual period, for which the deposit remained with the bank.

Automatic renewal option is available in the opening form.

Matured deposit in full or in part shall be renewed for a minimum period of one year with effect from the date of renewal and the interest rate for the renewed portion will be the interest applicable for the total renewed period ruling on the date of maturity of the original deposit or on the date of renewal whichever is lower.

There is no ceiling on amount of Deposit. However deposits are accepted in minimum lots of USD 1000, GBP 500 and EURO 1000. No income tax on interest earned. No gift tax on Gifts made out of balances. No wealth tax on balances held. Transfer of deposits within India free of cost to depositor. Source of funds FCNR can be booked debit to NRE account with banks or any other NRE account in India in same name as the customer, an NRO account can be debited in case the relevant certificate from CA and customer declaration is available. Can be opened with FX cash provided the customer is available in person. FCNR deposit can be booked form proceeds of another FCNR deposit.

FCNR can be opened with inward Swift remittance. Note that the currency of the swift remittance need not be the same as the currency of FCNR. From A4 in case the transaction amount equals or exceeds Rs. 100000.00

Type of account

These accounts may be opened in the form of term deposits for any of the 3-maturity period: 1 year & above but less than 2 years 2 year and above but less than 3 years 3 years only Joint accounts

Joint accounts in the names of two or more non-resident individuals may be opened provided all the account holders re persons of Indian nationality or origin. Branches to ensure the documentation for the FCNR joint holder are the same as NRE account holder. FCNR ACCOUNTS CANNOT BE OPENED JOINTLY WITH RESIDENT INDIANS. Documentation required in case FCNR proceeds Form A2 Request letter FEMA declaration

In case the customer has requested for remittance of interest/maturity proceeds of the FCNR deposits, form A2 can be completed/signed by the bank officer. Non-Resident (Special) Rupee (NRSR)Account: Existing NRSR savings account can be continued till September 30, 2002 at the option of the account holder be closed or the balance thereof be transferred to NRO Account on or before September 30, 2002. In case no response is received from the customer as regards his savings account, the same will be closed on October 1, 2002 & the balance will be transferred to his NRO savings account. In order to simplify the procedures and to provide greater freedom to NRIs for putting through financial transactions in India, NRIs are now permitted to open bank accounts in India, which will be at par with rupee accounts, maintained by residents. They can now open Non-Resident (Special) Rupee Accounts with banks in India which will have the same facilities and restrictions as are applicable to rupee accounts maintained in India by residents relating to repatriation of funds held in these accounts and/or income/interest earned on them. The scheme, which has become effective from April 15, 1999 provides that the procedure for opening such accounts is the same as that of domestic accounts of resident individuals.

Non-Resident (Non-reportable) Rupee (NRNR)Deposit Account: NRIs & other non-resident individual entities are permitted to open these accounts. Accounts can be opened by transfer of freely convertible foreign currency funds from abroad, or from NRE/FCNR accounts. Deposits can be held jointly with a resident. Deposits can be for a period from 6 months to 3 years, and can

be renewed further. Accounts may also be opened by transfer of funds from the existing NRE/FCNR accounts of the non-resident accounts holders. The principal is non-reportable; interest can be repatriated. There is no income tax on the interest.