Insights into the NRI accounts

Updated on June 10, 2022, 5:41 a.m.

After the nationalization of the commercial banks in 1960, the major challenge of the Government of India was to introduce and make Non-Resident Indian Banking Account favorable a runaway hit with the masses in foreign lands.

There is an age old saying in our village, that in search of green pasture, you will reach places and this is true in the case of our nation India. In a nation of 140 million people, 20% of the entire population goes in search of good jobs, passion and reach overseas. At this juncture they will lose the contact with their motherland, their families, friends and relatives. Furthermore, they will lose their contact with their respective banks, where they have invested their hard-earned money.

Once they reach foreign territory, they will have to adjust to the people, culture, environment and daily work routine as fast as possible like a duck adapting to the water.

A Non-Resident Indian is a person of Indian origin residing in India for less than 180 days and staying out of the nation for his personal and professional growth. Interestingly, you will be surprised to note than any Indian immediately leaving the nation in search of new opportunities will be branded as NRI.

Even though we see a tremendous rise in the banking segment, the knowledge of NRI Banking in the minds and hearts of the people is very less and this must be addressed.

Let’s analyse the concept of the Non-Resident Indian Banking, it refers to the account opened by the Non-Resident Indian or a Person of Indian Origin (PIO) with a financial institution like a bank, authorised by the apex organisation in Banking known as Reserve Bank of India.

Types of Non-Resident Indian Accounts

There are three different types of accounts that can be opened by the Non-Resident Indians and they are given below as follows:

Non-Resident External Account (NRE)
Non-Resident Ordinary Account (NRO)
Foreign Currency Non-Resident Account (FCNR)

Non-Resident External Accounts

The purpose of a Non-Resident External Account is to encourage the Non-Resident Indians to deposit the amount they earn in foreign land in Indian Rupees INR. Under this wonderful scheme, the customer will get a chance to open the

Current Account
Savings Account
Fixed or the Recurring Deposits

The best part of the Non-Resident External Account is that you can undertake the money transfers at cheap rates and earn the tax-free interest in India. Furthermore, you will also get the Card and the Cheque Books for your family living in India, giving them complete access to your account and they can operate it from anywhere and anytime.

Features of the NRE Accounts

The features of the NRE Accounts are given below as follows:

There is nomination facility for NRE Accounts.
The accounts are opened in Indian Rupees.
NRE Account can be held jointly if the other person is also NRI.
It contains the amount brought from abroad and maintained in India.
The money can be sent from foreign nation to India or any other nation.
The income from the interest on amount held in this account is exempted from the income tax in India.
Opening NRE Accounts in the name of people from Pakistan and Bangladesh requires permission from RBI.

Non-Resident Ordinary Accounts

An NRO or the Non-Resident Ordinary Account is the one that can be opened by the NRI, in order to make sure the amount coming from India directly reaches this account. The amount will reach the person in INR format. The income will be in the form of any Allowances, Interest from Fixed Deposits, Mutual Funds, Pension Allowance, Insurance Benefits, Bonuses and Rent. It is

Savings Account
Current Account
Fixed or the Recurring Deposits

Let us take an example of Mohan, an NRI residing in Texas, USA, has an apartment in Bangalore, which he has rented to Mr. Rahul. To receive the rent Mohan has to open an NRO Account is his bank, so that Rahul can deposit the rent amount regularly.

Features of the NRO Accounts

Here are some of the features of the NRO Accounts given below:

The amount will be deposited in Indian Rupees only.
There are no restrictions to currency conversions in an NRO Accounts.
Amount earned within the territory of India will be considered and outside amount will not be considered.
The customer must inform the bank that he or she is going and staying abroad for various reasons.
The bank will convert their savings account to the NRO Accounts.

Foreign Currency Non-Resident Account

The Foreign Currency Non-Resident Account allows the NRI or the person of the Indian Origin to make deposits in foreign currency in the account. The best part is customer can open the account in US Dollars, UK Pound Sterling, Japanese Yen, Arabian Dirhams, Canadian Dollars, Euro and others. The interest is said to be tax free until you are having the NRI status and want to return back to your motherland.

Features of the FCNR Account

The features of the Foreign Currency Non-Resident Accounts are given below as follows:

The tenure of this account varies from 1 to 5 years.
The customer can save the money in foreign denominations.
The interest a customer earns on the total deposit is exempted from taxes.
No interest will be charged if the customer withdraws the entire amount before 1 year from date of opening account.
The interest a customer earns on the deposits is fully transferable.
A customer can open the FCNR account by transferring the money from your Non-Resident External Accounts.
There is internet facility encouraging the customers to have 24-hour access to the accounts with quick and secured transactions.
The FCNR account is the Term Deposit Account and not a Savings account, it is an account opened at a bank or financial institute where the amount is kept for a particular period of time as a locking period.

Documents Vital for Opening the NRI Accounts

There are various documents required for Opening NRI Accounts

Copy of the Aadhar and Pan Card.
Recent Passport Size Photographs.
Proof of the Foreign and the Indian Address.
Copy of the Form 60-Used when customer do not have the Pan Card Number.
Proof of the NRI Status like the Work Permits, Contractual documents, Visa Copy, Employment Credentials and the Offer letter.
Copy of the valid passport showing details like the Name, Age, Date of Birth, Photo, Expiry date, Signature, Immigration and other vital documents.

Frequently Asked Questions:

How to deposit money into the FCNR Account?

You can deposit the money into the FCNR using the NRE Accounts.

Will the interest rate change during the tenure of the deposits?

The rate of interest is fixed.

Is it possible to use the NRO account to open FCNR Account?

No, you cannot use the NRO account to open FCNR Account.

Can I open the FCNR Account in a third-party name?

No, you cannot open FCNR account on a third party name.

What is regularity of the rate of Interest paid on NRO Account?

Interest on savings is paid on a quarterly basis like 31^st March, June, September and December.

Can you open an NRE Account using the NRO account?

Yes, you can open account by transferring amount.

Can you access your NRE and NRO accounts when you are abroad?

Sure, you can access NRE and NRO using the mobile banking.

Is it possible to register a nominee in the NRE and NRO Accounts?

Yes, you can register a nominee.

Is it possible to assign a Power of Attorney for these accounts?

Yes, you can assign the POA to these accounts, but they will take only limited decisions.