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banking

4 Types of NRI Banking/Savings Account. How to make use of these accounts?

by Holistic Leave a Comment | Filed Under: NRI Tax Planning

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Are you confused about choosing the right bank account to use as an NRI…? You will get the answer in this article.

An Indian living abroad doing a service, running a business, or pursuing any vocation is a Non-Resident Indian. It is estimated there are over 25 million NRIs spread across the globe.

With this huge Diaspora, banking needs for the transfer of funds, savings, investments, and repatriation of NRIs have also expanded.

Banking Laws allow an NRI to maintain bank accounts in India, invest in securities/shares and deposits, with Indian firms/companies, and invest in immovable properties in India. In this article, we’ll discuss NRI banking/savings accounts.

Types of NRI Bank (savings) Accounts

An NRI can open, hold and maintain, different types of bank accounts with a bank authorized to deal in foreign exchange. The four types of NRI bank accounts most widely used and offered by the leading banks in India are:

1. Non-Resident External (NRE) Account

2. Non-Residency Ordinary (NRO) Account

3. Foreign Currency Non-Resident (FCNR) Account

4. Resident Foreign Currency (RFC) Account

Now let’s look into the special features and benefits of every account in detail

1. Non-Resident External (NRE) Savings/Fixed Deposit Account

The NRE account is mainly used to make deposits from abroad.

An NRE bank account can be opened and maintained as a current, savings, recurring, or fixed deposit account.

This account is maintained in Indian Rupees. Deposits of all foreign exchange are first converted to Indian rupees at the buying rate by the banks.

Withdrawal in foreign currency is allowed given the Indian Rupees in the account are converted to the same at the selling. The account holder has to bear the conversion loss.

Types of asset class

Money from this account is freely repatriable, that is, funds held in this account can be freely sent to India as well as another country. Moreover, the fund is transferable from an NRE account to an NRO account without any restriction.

Similarly, the NRE account can receive money remitted from abroad, or transferred from another NRE account in India.

Funds held in this account and interest earned are fully exempt from wealth tax and income tax, as well as gifts to close relatives in India are free of gift-tax.

An NRE account be opened and held jointly by more than one NRI. A resident holding a power of attorney (PoA) is not authorized to open an NRE account on behalf of an NRI, but he/she can make local payments in Rupees on behalf of the NRI account holder.

Loans/overdrafts are available to an NRE account holder against the security of a fixed deposit in his/her account.

The NRE account can be converted into a regular resident account whenever the NRI account holder returns to India and becomes a resident.

Nomination is allowed for NRE accounts.

2. Non-Residency Ordinary (NRO) Savings/Fixed Deposit Account

The NRO account is mainly used to make a deposit from Indian or abroad.

An NRO account can be opened and maintained in the form of a current, savings, recurring, or fixed deposit account.

An existing bank account held by an Indian National is also designated as an NRO account upon the holder being declared NRI.

The NRO account is maintained in Indian Rupees.

Funds held in the NRO account are repatriable but only on certain conditions as follows. The maximum limit of funds transferable from an NRO to an NRE account is USD 1 million in a financial year. The transfer of funds from the NRO to the NRE account is subject to taxability as per your tax slab.

You need to follow procedures which are clearly explained in the article here, to transfer the funds from NRO to the NRE account.

Interest earned on the funds in this account is taxable.

An NRO account can be held jointly with a resident and /or with a non-resident Indian. However, a resident PoA holder is not authorized to open an NRO account on behalf of an NRI. But he/she can make local payments on behalf of the same.

Loans to non-resident account holders and third parties may be granted in Rupees by Authorized Dealers / bank against the security of fixed deposits subject to certain terms and conditions.

The NRO account can be converted into a regular resident account as and when the NRI account holder returns to India and becomes its citizen.

A nomination facility is available in this account.

The NRO account has a repatriable limit of $1 million every financial year.

Below transactions are permissible from an NRO account:

  • Over and above the USD 1 million limit, the below transactions are permissible by RBI:
  • Interest Income earned for savings balances and deposits.
  • Dividend income earned.
  • All current business income earned in India.

NRIs can manage these accounts by either appointing a mandate holder to look after their NRE or NRO accounts in India, or executing a Power of attorney to carry out their investments.

In case of capital market, NRIs can manage themselves through online broking platforms NRIs can invest in futures & options segment of the exchange out of Rupee funds held in India on a non-repatriation basis.

However, they are not permitted to carry out Intra-day transactions in the cash segment. Short Selling is not permitted. Also, they cannot participate in currency derivatives trading.

3. Foreign Currency Non-Resident (FCNR) Fixed deposit Account

An FCNR account can be opened only in the form of term deposits with a maturity ranging from 1 to 3 years.

The account is maintained in any free convertible currency mainly U.S. Dollar, Pound Sterling, Japanese Yen, and Deutsche Mark.

Indian currency cannot be deposited in this account.

Balances, principal, and interest earned, held in this account can be transferred outside India in the same currency in which the account is maintained or in any other convertible currency.

The account holder may, of his own accord, receive repayment in Indian Rupees at buying Rate on the date of repayment.

The entire deposit, principal plus interest, is exempt from tax.

This account can be opened jointly with a resident close relative on a former or survivor basis. The resident close relative as a PoA holder can operate the account in accordance with extant instructions during the life time of the NRI account holder.

Loans may be granted either to the depositor or the third party against the security of funds held in the FCNR account.

When the NRI account holder returns to India and becomes its citizen, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by the holder.

A nomination facility is available in this account as well.

4. Resident Foreign Currency (RFC) Account

RFC account is mainly useful for returning NRIs to deposit their foreign currency in India. The RFC account can be maintained only in a Foreign Currency.

This account can be held as a savings account as well as a term deposit account. The funds in the RFC account can be withdrawn when necessary but interest will be paid only if the amount is held for more than one year.

Indian rupee cannot be deposited in the RFC account.

The interest earned from the funds is taxable in India. But if you are a returning NRI and have the RNOR status, you can get exempt from tax for the 2 year period with RNOR status.

You can transfer funds from your NRE or FCNR account if you decide to become a Resident.

The deposited funds can be transferred to NRE or FCNR account if you decide to become an NRI again.

The interest earned by the funds in the RFC account is fully repatriable.

You cannot avail of any loan against the deposits in the RFC account.

NRI investments in Indian equity markets

Besides shares or debenture of an Indian Company through the stock exchanges, NRIs can also invest in other securities like Mutual Funds, ETFs, Government Securities, treasury bills, Bonds, Portfolio management services etc.

They can do so via NRE (Non-Resident External) account, or NRO (Non-Resident Ordinary) accounts. Their investments can either be on repatriation or non-repatriation basis, with investments made through the NRE account being repatriable, while those through the NRO account has a repatriable limit of $1 million every financial year.

Enablers that would make NRI investments

It has already been well established and recognised that the Indian diaspora are very successful and also enjoy a strong emotional connect with their country of origin. Thanks to a digital and connected world, NRIs today are more strongly connected to India than they were in the past.

They are a strong contributor to forex inflows in the form of remittance, investments and philanthropy.

NRIs are keen to contribute to India in multitude of ways. As India cements its position as a preferred global investment destination, and added to the fact that the Indian markets are expected to perform strongly over the next several years, the inflows from the NRI community can also grow manifold from current levels.

This inflow is more stable and predictable and sticky against some of the institutional inflows which by definition is opportunistic in nature.

Final Thoughts:

Understanding these fine differences between NRE, NRO, and FCNR accounts helps an NRI to choose the right kind of bank account suitable for him.

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Working with holistic investment planners was a really wonderful experience for me. For me the entire team had been very supportive in all ways. Their working strategy is well planned and methodical. They always keep me informed and updated about my investments, so that i can take informed decisions. The team first helps us understand the basics of investments, then they collect data, work with the data and then provide investments solutions according to our goals which i find it the best. Good luck to the entire team.
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We have availed holistic service from last couple of years and are very happy with our decision. Their systematic approach has helped us plan our finances and meet our goals. They provide very comprehensive and detail plan and resource management every 6 months which ensures we are on right track to achieve our goals. Rajan and Ramalingam from holistic are always there to help us with our queries. They have also accommodated any changes to our goals or resources mid year in a professional manner.
Ashook Panneerselvam
Ashook Panneerselvam
21. March, 2023.
For the past year, I have been interacting with Holistic Investment. I frequently read Nanayam Vikatan, which is a publication owned by the Vikatan family, and I was impressed by their financial advice. My brother also suggested holistic investing, and he also got excellent financial advice. Holistic Investment follows a methodical approach that I really liked because they first fully understand our financial situation "As Is," which includes "Assets" and "Liabilities," as well as our short-, mid-, and long-term goals, on the basis of which they provide a detailed plan on how to achieve our goals for which they are recommending various investment options. Even in the investment advice, why do they suggest particular mutual funds and what is the justification behind it, which adds transparency to the client. One essential factor is that they are always available. Even if I needed to make some urgent financial decisions, they were very helpful and kind to answer my questions via phone calls, WhatsApp messages, and emails. I was very happy with their service. Periodic reviews are also crucial, even though I have forgotten that they occur once every three months, and I also intend to renew this year.
Mahesh S
Mahesh S
19. February, 2023.
I have availed Holistic investment service for last 1yr against my early retirement decision. they provided me comprehensive detailed report how to move ahead with my existing resources. moreover, they are available to me whenever i have any doubt.. highly recommend others to avail their service
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Google Reviews

Lingesh MMG
Lingesh MMG
20. September, 2023.
Na eppo tha financial goal la enna therunju kitta..enaku full support panna thuku thank you..🥰 friendly nalla pesuninga...
Ravi L
Ravi L
15. August, 2023.
Very knowledgeable and professional team, guided me with the precise financial solutions and timely suggestions.
Hardik Dave
Hardik Dave
5. July, 2023.
Holistic Investment is really nice and trust worthy financial planner. They plan things in realistic manner and also consider future dimensions of items also. They are always available for small or big queries, and also share knowledge and help you become more financial literate, and take right decisions in all financial matters.
Dr. Padmakar Wagh
Dr. Padmakar Wagh
27. June, 2023.
Mr Ramalingam who is the Director of Holistic investments has a excellent financial planning knowledge, the entire Holistic team has been very helpful in my financial planning journey and execution. This is my third year of financial planning with Holistic investments and so far I am satisfied with the progress I have made.
Binamra Dash
Binamra Dash
13. June, 2023.
Very knowledgeable team. Guided me properly with my concerns.
Murugan Bala
Murugan Bala
16. May, 2023.
I have been investing through Holistic for the past 4 years and my experience with them have been really good. The team of Rajan and Ramalingam doing excellent services in meeting my needs through proper guidance on investment options customized. Theya re always available on any specific needs time to time.I would recommend their services to my friends and colleagues too.
Neeraja R K
Neeraja R K
15. May, 2023.
Working with holistic investment planners was a really wonderful experience for me. For me the entire team had been very supportive in all ways. Their working strategy is well planned and methodical. They always keep me informed and updated about my investments, so that i can take informed decisions. The team first helps us understand the basics of investments, then they collect data, work with the data and then provide investments solutions according to our goals which i find it the best. Good luck to the entire team.
deepika kulkarni
deepika kulkarni
21. April, 2023.
We have availed holistic service from last couple of years and are very happy with our decision. Their systematic approach has helped us plan our finances and meet our goals. They provide very comprehensive and detail plan and resource management every 6 months which ensures we are on right track to achieve our goals. Rajan and Ramalingam from holistic are always there to help us with our queries. They have also accommodated any changes to our goals or resources mid year in a professional manner.
Ashook Panneerselvam
Ashook Panneerselvam
21. March, 2023.
For the past year, I have been interacting with Holistic Investment. I frequently read Nanayam Vikatan, which is a publication owned by the Vikatan family, and I was impressed by their financial advice. My brother also suggested holistic investing, and he also got excellent financial advice. Holistic Investment follows a methodical approach that I really liked because they first fully understand our financial situation "As Is," which includes "Assets" and "Liabilities," as well as our short-, mid-, and long-term goals, on the basis of which they provide a detailed plan on how to achieve our goals for which they are recommending various investment options. Even in the investment advice, why do they suggest particular mutual funds and what is the justification behind it, which adds transparency to the client. One essential factor is that they are always available. Even if I needed to make some urgent financial decisions, they were very helpful and kind to answer my questions via phone calls, WhatsApp messages, and emails. I was very happy with their service. Periodic reviews are also crucial, even though I have forgotten that they occur once every three months, and I also intend to renew this year.
Mahesh S
Mahesh S
19. February, 2023.
I have availed Holistic investment service for last 1yr against my early retirement decision. they provided me comprehensive detailed report how to move ahead with my existing resources. moreover, they are available to me whenever i have any doubt.. highly recommend others to avail their service
Google rating score: 4.5 of 5,
based on 104 reviews

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