Non Resident Banking
The Indian diaspora business today means lots and lots of money. And
talking of money, the relevance of NRI banking comes into the big picture..
Banks today offer the non-resident Indian plenty of accounts to choose
from. Here we take a look at the different accounts.
A Non-Resident External Rupee Account (NRE) is a savings account and it
offers a premium of 4.5 per cent per annum. Deposits are possible for
six months to seven years and the bank holds total freedom in determining
the interest rate. Both the principal and interest earned are repatriable.
An NRE account can only be jointly held with another NRI.
However, RBI rules specify that an NRE account holder can give mandate
to a resident in India to operate the account. The resident cannot open
an NRE account himself, he also cannot issue repatriation advice. It may
also be noted that once the foreign exchange is credited to the account,
it is converted to rupees immediately and held in rupees.
Further, the exchange risk has to be borne by the depositor. The bank
has no role to play here. The money is converted into rupees the moment
it is credited, whether or not the rupee is strong or weak.
Another option before the NRI is the Foreign Currency Non-Resident (FCNR)
Account. One feature about this accounts that it isn’t a savings
or current account. Deposits can be made for 1-3 years and interest rates
depend on the currency. Banks have total flexibility in determining the
interest rates in this regard. The principal and interest earned are repatriable.
As in the case of NRE accounts, here too joint holding of the account
is permitted with only another NRI.
Also, money can be held only in foreign currency and can be converted
into Indian money only when the depositor wishes to. Money can be held
in only five currencies such as US dollar, Japanese Yen, German Mark,
Pound Sterling or the Euro.
Unlike the NRE account, the exchange risk is borne by the bank and not
by the depositor. The conversion of the money put into the FCNR account
takes place only when the depositor wants it to be converted. The advantage
is that the depositor can wait for the rupee to fall s that he can gain
The Non-Resident Non-Rapatriable (NRNR) account is also no savings or
current account. Deposits can be made for six months to three years. As
the name suggests, the principal is not repatriable, however the interest
is. And, the principal and interest earned don’t attract any tax.
With regard to joint holding, a joint holding is possible with a resident
who is the depositor’s close relative. And unlike an FCNR account,
once the foreign exchange is credited to the account, it is converted
to rupees. The exchange risk factor is similar to that of the NRE account,
it is borne by the depositor and not by the bank. One important feature
of this account is that it is mainly targeted at an individual who has
no plans whatsoever to go back to a foreign country.
Meanwhile, the Non-Resident Ordinary (NRO) account is a rent account
or savings account. This offers 4.5 per cent per annum. And further, deposits
to this account are similar to local term deposits. Repatriation is possible
only for the interest ad of course with Reserve the permission of Reserve
Bank of India. However, the principal cannot be repatriated. Further,
the principal and interest earned are taxable too. Joint holding is permitted
with a resident, unlike the other above-mentioned accounts. Another feature
is that there is no exchange risk as the money is credited in rupees here.
Another option is the Non-Resident Special Rupee (NRSR)account which
is a current account and savings account at 4.5 per cent per annum. Deposits
to his account are identical to local term deposits. The principal nor
the interest are repatriable, and they do attract tax too. Joint holding
in a NRSR account s permitted with a resident, similar to the NRO account.
And here too, there is no exchange risk.
Meanwhile, the Resident Foreign Currency (RFC) account is also a current
account and savings account at 4.5 per cent per annum. Deposits are similar
to that of FCNR accounts. The principal and interest earned are repatriable.
They also do not attract any tax up to certain periods. The account holder
can have a joint holding with another NRI, and there is absolutely no