Non-resident bank accounts are of two types they are :
- Rupee accounts
- Foreign currency accounts
1. Rupee accounts
The different types of rupee accounts a non-resident can open are :
- Non-resident ordinary (NRO) account
- Non-resident external (NRE) account.
Earlier there were two other types such as :
- Non-resident Non Repatriable (NRNR) account
- Non-resident Special Rupee (NRSR) account.
These two have been terminated with effect from April 1, 2002 and September 30, 2002 respectively.
Non-resident ordinary account (NRO)
The account that an Indian citizen has in India is converted to an NRO account when he emigrates or goes abroad to work excluding Nepal or Bhutan. Non-residents may open NRO accounts for receiving money in Indian rupees. But Pakistanis and Bangladeshis require RBI approval to open this account. The balance in these accounts represents rupee funds/ earnings in India. These can be savings accounts, current accounts, recurring deposit accounts or fixed deposit accounts. It can be opened jointly with Indian residents or other non-residents. Credits may be from :
- Foreign currency
- Foreign remittances
- Traveler’s cheques
- Earnings of foreign currency non-resident (FCNR) deposits
- Earnings of non-resident external (NRE) deposits
- Earnings of all justifiable dues in India like rents, dividends etc.
Account holders must give an undertaking that the credits and debits in the account will be in accordance with RBI regulations. Normally funds from these accounts are not repatriable unless specifically permitted by RBI such as current income. Remittances made would be only after the deduction of applicable taxes. Interest on NRO savings accounts are at the same rate as resident accounts.
Up to $1 million can be repatriated for sale proceeds of immoveable property, medical expenses, education etc. this can also be used to pay on money spent on International Credit Cards.
Non-resident external account
Non-resident external account (NRE) has to be opened with convertible foreign exchange. Withdrawals are permitted only for local payments, transfer to NRE/ FCNR accounts and other investments permitted by the RBI. The objective of these accounts is to help individual non-residents to place their funds in Indian rupees to meet expenses in India or to make investments. The accounts can be of two types such as savings account and term deposit. Money deposited in this accounts are freely repatriable. Only foreign remittances, traveler’s cheques/ foreign currencies or proceeds of NRE deposits or FCNR Deposits or interest on NRNR deposits must be deposited in this account. The maturity proceeds of NRNR deposits may also be credited to this account, rupee funds should not be credited to this account.
Joint accounts are permitted if all account holders are NRIs. A resident Indian cannot be a joint account holder.NRE Savings holders can withdraw savings deposits at any time and therefore banks must not mark any lien on these deposits. Power of attorney holders can operate the account for local payments and approved investments. Repatriable term deposits can be made in the normal course for a minimum period of one year and a maximum of three years. Loans against term deposits can be availed for personal/ business purposes. Nevertheless, loans against term deposits cannot be taken for re-lending, agriculture/ plantation or for investments in real estate
Interest on NRE savings accounts will be same as of domestic savings deposit rate (3 1/2% p.a) On fixed deposits for one to three years the interest rate should not exceed the LIBOR/Swap rates for the US dollar of the corresponding maturity plus 75 basis points. The LIBOR/ SWAP rates as on the last working day of the preceding month would form the base for fixing upper limit rates for the interest rate.
2. Foreign currency accounts
Different types of Foreign Currency accounts are :
- Foreign Currency (Non-resident) Deposit Accounts (FCNR (B))
- Temporary Foreign Currency Accounts.
Foreign Currency (Non-resident) Deposit Accounts (FCNR (B))
Non-resident Indians, persons of Indian origin residing outside India are eligible to open FCNR (B) accounts. Overseas corporate bodies are not permitted to open these accounts. If there is an FCNR (B) account in the name of an Overseas Corporate Body (OCB) it can be continued till maturity and on maturity the proceeds should be repatriated.
The currencies in which these deposits can be maintained are as follows :
- US dollar
- British pound sterling
- Japanese yen
- Australian dollar
- Canadian dollar
Interests earned on these accounts are in foreign currency and are free of tax. FCNR (B) deposit accounts are term deposits and are held by banks for maturities between to five years. Repatriation of funds in foreign currencies is permitted. Recurring deposits are not accepted in the FCNR (B) scheme.
A FCNR (B) deposit account can be opened by a non-residents in the following ways :
- By using foreign currency
- By an inward remittance in convertible foreign currency through normal banking channels
- By tendering traveler’s cheque while on a visit to India
- By funds received in rupees to the account a non-resident bank maintains in India with the bank
- By funds that are of a repatriable nature (as per RBI regulations)
- By transfer from an existing NRE/FCNR (B) account
Only Authorized Dealers/Authorized Banks are permitted to accept deposits. Transfer of funds from an existing NRE account to FCNR (B) account and vice versa of a same account holder is permitted without approval of RBI.
Temporary Foreign Currency Accounts
Organizers of international conferences, seminars, conventions etc. are permitted to open temporary foreign exchange accounts. These accounts are operated for the receipt of the delegate fee and payment towards expenses including payment to special invitees abroad. Authorized dealers can open such account. But the organizers should obtain a prior approval from the concerned Administrative Ministry of Government of India.
Credits to these accounts are as follows:
All inward remittances in foreign currency towards registration fees payable by overseas delegates, grant, donations fees and sponsorship received from abroad, in connection with the conference, convention, etc.
Debits to these accounts are:
- Payment made to foreign/special invitees attending the conference, convention, etc., on the specific invitation of the organizers, towards hotel charges, travel, etc.
- Remittance towards refund of registration fees to foreign delegates and unutilized sponsorship amount.
- Bank charges, if any
- Conversion of funds into rupees.
Any other credits/debits would require the prior approval of the Reserve Bank of India (RBI). The Account must be closed immediately, after the conference or event is over.