Today, there a number of Indians working abroad. Therefore, the banking services catering to the transfer of funds, savings, earnings, investments, and repatriation of Non-Resident Indians have grown tremendously.
Banking laws for NRIs allow for the following deposit schemes, or simply put, accounts with authorized dealers -- banks and financial institutions authorized by Reserve Bank of India [Get Quote] to deal in foreign exchange -- to be maintained in Indian rupees and in foreign currency:
- FCNR -- Foreign Currency Non-Resident Account
- NRE -- Non-Resident External Rupee Account
- NRO -- Non-Resident Ordinary Rupee Account
The special features for the above mentioned accounts are:
These accounts are only for term (fixed) deposits with the maturity ranging from one year to three years.
NRE accounts are opened in Indian rupees and all foreign exchange deposits received for credit of these accounts are first converted to Indian rupees at the buying rates by the banks.
A bank account, held by a person designated as NRI, in India is designated as an Ordinary Non-resident Account (NRO Account).
Indian rupees (all foreign exchange deposits received need to be first converted to Indian rupees at the buying rates by the banks)
Some important facts that you should know about such accounts:
- NRI accounts cannot be opened/ operated by a Power-of-Attorney holder in India on behalf of the NRI: However, the latter can operate the accounts for the purpose of local payments to be made on behalf of the NRI account holder. The Power-of-Attorney holder is not permitted to make gifts from these accounts and is not allowed to make remittances outside India.
- NRIs can invest in shares and securities of Indian companies, government securities, etc. NRIs can invest in units of domestic mutual funds and deposits with Indian companies, immovable properties in India, and proprietorship/ partnership concerns in India.
These investments can be done using a NRO or NRE account. However, an important point to remember is that if you use an NRO account, the funds sourced from any investments cannot be repatriated. This problem is solved by using a NRE account.