A Primer on NRI Bank Accounts

According to UNDP’s 2010 (United Nations Development Program) report India has a diaspora of 25 million of people living around the world. The second largest in the world! Their contribution to the development of India cannot be measured just by the amount of money they remit back home ($ 55 Billion, 2010). They are supporting the growth of the country in every capacity that they can. Therefore it is worthwhile that the government do much more to improve their lot.

One major move to help NRIs is that the Indian Government allows Non-resident Indians to open bank accounts in India. There are a number of banks, which offer the facility to open an NRI account. To make things easier, the Non Resident Indian can open an account from overseas itself.

Types of NRI Bank Accounts

A non resident now has many options of bank accounts to choose from. She can choose the type of bank account which is best suitable for her financial needs.

One of the important things an NRI look for in such a bank account is repatriability. Repatriable means to transfer assets such as cash or securities to a foreign country from a home country. It depends on the nature of the asset, laws in the foreign country as well as that of the home country.

Nevertheless, not all bank accounts help them to transfer assets from India to foreign countries. Therefore, it is necessary for us to understand the different types of NRI Bank accounts before opening one.

NRO account: This is Ordinary Non- Resident rupee Account. When a person leaves India for a long period and stays in a foreign country for business or for any other purpose her account here is termed as NRO account. The person can also open an NRO account from the foreign country by remitting the funds from there.

It can be opened without approval for transactions in rupees. The type of account could be current, savings, recurring or fixed deposit account. It can be opened independently or jointly with residents. After the NRI returns to India permanently, this account is treated as a resident account. All of the interest income coming from an NRO account is taxable.

NRE Account: This is the Non Resident (External) Rupee account. This is the most commonly used account by NRIs. It can be opened without any approval provided the funds for this account are transferred in freely convertible foreign currency. The type of account could be saving, current, recurring or fixed deposit account. It could be opened jointly with other NRI. This account has the benefit of being exempted from tax.

It can be opened by NRI, PIO (People of Indian Origin) and OCB (Overseas Corporate Bodies i.e., Companies owned by individuals of Indian origin or NRI). All legal foreign exchange and transactions concerning other NRIs can be done through this account.

FCNR Account: This is the Foreign Currency (Non Resident) Account. This account helps NRIs to overcome the fluctuations in foreign exchange. One feature of this account is that you can keep the money in the foreign currency itself.

However it can be maintained only in Pound Sterling, U.S. dollar, Deutsche Mark or Japanese Yen. Other foreign currencies can be converted to these currencies if the person so desires.

This account is maintained only in term deposit. The deposit period is between six months and three years.

Payment from abroad has to be in the foreign currency in which the account has to be maintained. The balances and the interest on this account are exempt from tax. This account is mainly used for investing in India or payment of exports.

NR-NR-RD Scheme: This is the Non Resident (Non Repatriable) Rupee Deposit Scheme. It is maintained in Indian rupees. The deposit in this account is from the funds transferred to India. The funds should be freely convertible foreign currency and through proper banking channels. The deposit period is from six months to three years.

This account can be opened by NRIs, PIOs and OCBs. For the opening of this account, the finances have to be from another NRI account or from a foreign country. All of the interest income coming from an NRNR account is not taxable. The interest can, however, be repatriated.

NRS Account: This stands for the non resident special account. It can be opened by NRIs and PIOs. The procedure for opening of this account is same as opening an account for resident Indians. This account also offers the same facilities which are given to residents of India. The interest coming from NRS account can be repatriated.

Opening an NRI Bank Account

Opening a NRI bank account is easy. These are the important steps to follow.

The form to open an account can be downloaded from the website of the bank of your choice.
The documents required for opening an account are photocopy of passport, a set of two photographs and visa or residence permit of the country the NRI is residing in.
These along with the filled form have to be submitted for verification.
Verification is done either by officials at the Indian Embassy or consulate in the country of his residence or the Notary public. If the chosen bank has an overseas branch in the applicant’s city, documents are verified at that office.
The payment for the processing has to be paid along with the submission of documents.

After the account has been opened, the NRI applicant can authorize a local citizen to operate the account. For this a letter of authority or Power of Attorney is required. NRIs can appoint nominees for their account, which could be a resident Indian or NRI.