Banking Regulations for NRI

NRI may hold bank accounts in India with AD or AD bank. The AD Bank in India may accept deposits from NRI under the following schemes:
i. Non-Resident (External) Account (NRE) Scheme in Indian Rupees
ii. Non-Resident (Ordinary) Account (NRO) Scheme in Indian Rupees
iii. Foreign Currency Non-Resident (FCNR) in Foreign Currency
iv.Special Non-Resident Rupee Account (SNRR)

F Features of various Deposit Schemes available to NRIs:

ParticularsFCNR A/c NRE A/c NRO A/c SNRR A/c
Who can open an account? NRI & PIO* NRI & PIO* Any person resident outside India* Any person resident outside India (who has business interest in India)
Type of Account Term Deposit only Savings, Current, Recurring, Fixed Deposit Savings, Current, Recurring, Fixed Deposit Current A/c
RepatriationFreely repatriable Freely repatriable Current income is freely repatriable, provided all taxes are duly paid. Amounts other than current income can be repatriated to the extent of USD 1 million per FY Repatriable subject to payment of applicable taxes
Taxability on Interest earned Interest earned exempt under section 10(15) (iv) (fa) of the Act. Interest earned is exempt under section 10(4) of the Act. Interest earned is Taxable. TDS @ 30.9% or as per DTAA rate whichever is beneficial, provided mandated documents are submitted. Not an Interest bearing account.
CurrencyAny permitted currency i.e. Foreign Currency which is freely convertible RupeesRupeesRupees
Rate of InterestRate of interest are in the accordance with the directions issued by the RBI from time to time
Change in residential status from Non-resident to resident FCNR (B) deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by the account holder. Authorised dealers should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC account (if the depositor is eligible to open RFC account), at the option of the account holder. NRE accounts should be designated as resident accounts or the funds held in these accounts may be transferred to the RFC accounts, at the option of the account holder NRO accounts may be designated as resident accounts on the return of the account holder to India for any purpose indicating his intention to stay in India for an uncertain period. Likewise, when a resident Indian becomes a person resident outside India, his existing resident account should be designated as NRO account. SNRR A/c may be designated as resident rupee account on the account holder becoming resident.


*For the purpose of the said FEMA regulation, PIOs do not include nationals of Pakistan, Bangladesh or such country as may be specified by Government.

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

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

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

No, the sister shall be eligible to operate the a/c only if she is a POA holder as per the instructions of NRI account holder. Operations in FCNR, NRE and NRO a/c by his sister as a POA holder is restricted to the following:

• Withdrawals for permissible local payments including payments for eligible investments subject to relevant compliances
• Remittance to the account holder himself (i.e. NRI in this case) through normal banking channels

No. NRO, NRE and FCNR a/c cannot be opened by resident POA holder in India on behalf of NRI.
Yes. Relatives (as per Companies Act) who are NRIs are permitted to be joint holders in existing / new resident bank accounts with the resident account holder on “Either or Survivor” basis as per the conditions prescribed.

Yes. Under FEMA regulations, NRIs can avail loan from Banks for himself or for Third Party i.e. RI/Firms/Company in India against the collateral of funds held in FCNR and NRE A/c without any ceiling subject to usual margin requirements. The loan amount can be utilized by NRI only for the following purposes:

• Personal purposes or for carrying on business activities. The loans cannot be utilized for the purpose of ‘relending’ or for carrying on agriculture, plantation activities or for investment in real estate business.
• Capital contribution in Indian firms / companies.
• Acquisition of flat / house in India for his ‘own’ residential use.

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

Yes, NRIs can avail loan from branches/correspondent bank outside India in his favor or request the branch/correspondent bank outside India to provide loan to a third party outside India. However, the amount shall be utilized for bonafide purposes.
AD Banks may at their discretion/ commercial judgment allow over drawings in NRE A/c up to a limit of Rs. 50,000/- subject to the condition that such over drawings together with the interest payable thereon are cleared/repaid within a period of 2 weeks, out of inward remittances through banking channels or by transfer of funds from other NRE/ FCNR A/c.
Permissible Credits Permissible Debits
· Remittances to India in any permitted currency

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

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

· Transfers from other NRE/ FCNR a/c

· Interest accruing on the funds held in the account

· Current income in India (subject to tax payment) · Maturity proceeds of any permissible investment originally made from NRE/ FCNR a/c

· Refund of share/ debenture subscriptions of to new issues of Indian companies if original subscription was made from NRE/FCNR a/c

· Refund of application/ earnest money/ purchase consideration on non-allotment/cancellation from builder/ developer (with interest) provided original payment was made from NRE/FCNR a/c

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

· Remittances outside India

· Transfer to NRE/ FCNR a/c of   the account holder or any other person

· Investment in shares/securities/ commercial paper of an Indian company or for purchase of immovable property in India

· Any other transaction if covered under general or special RBI permission
Permissible Credits Permissible Debits
· Proceeds of remittances received in any permitted currency from outside India

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

· Legitimate dues in India

· Transfers from other NRO accounts

· Any amount received in accordance with RBI regulations
· All local payments in rupees including payments for investment subject to compliance with RBI regulations

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

· Transfers to other NRO a/c

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

•  SNRR A/c can be opened only by a person resident outside India who has business interest in India.

•  Opening of SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh requires prior approval of RBI.

•  The SNRR A/c should carry the nomenclature of the specific business and balances in such A/c should commensurate with the operations.

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

•  The debits and credits in SNRR A/c should be specific/ incidental to the business proposed to be done by the account holder.

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

•  The tenure of SNRR A/c should be concurrent to the tenure of contract/ period of operation/ business of the account holder and in no case the period should exceed 7 years from the date of opening of the account.

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

Yes, AD Banks can issue International Credit Cards to NRIs/ PIOs without prior approval of RBI. Such transactions may be settled by inward remittance or out of balances held in the NRI/PIO’s NRO/ NRE/ FCNR A/c.