NRI BANKING

CHAPTER 1-NRI BANKING AN INTRODUCTION:As per RBI guidelines, the residential status of an Indian changes to that of the Non-Resident, in
the event of his stay abroad being more than 183 days. This period of 183 days is not applicable
in certain cases like going overseas for employment or business. It is mandatory to inform the
bank of your change of your residential status.
With a view to attract the savings and other remittance into India through banking channels from
the person of Indian Nationality / Origin who are residing abroad and bolster the balance of
payment position, the Government of India introduced in 1970 Non-Resident(External) Account
Rules which are governed by the Exchange Control Regulations. The funds held in Non-Resident
(External) Accounts (NRE Accounts) qualify for certain benefits like exemptions from taxes in
India, free repatriation facilities, etc.
NRI banking facilities are available to NRIs and PIOs.
WHO IS A NON RESIDENT INDIAN [NRI]?
A Non Resident Indian (NRI) as per FEMA 1999 is an Indian citizen or Foreign National of
Indian Origin resident outside India for purposes of employment, carrying on business or
vocation in circumstances as would indicate an intention to stay outside India for an indefinite
period. An individual will also be considered NRI if his stay in India is less than 182 days during
the preceding financial year.
To meet the specific needs of non-resident Indians related to their remittances, savings, earnings,
investments and repatriation, the Government of India introduced in 1970 Non-Resident
(External) Account Rules which are governed by the Exchange Control Regulations.
"Non Resident Indian" (NRI) means an Indian citizen or a foreign citizen of Indian origin
(excluding citizens of Bangladesh and Pakistan) residing outside India. Students studying abroad
are also treated as NRIs.
Indian citizen who stays abroad for an indefinite period on employment, business or on any
vocation is a Non-Resident. Diplomats posted abroad, persons posted in UN Organizations and
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NRI BANKING
Officials deputed by PSU on temporary assignments are also treated as Non-residents.
PIO CARD SHCEME
The Government has launched a comprehensive Scheme for the Persons of Indian Origin-called
the PIO Card Scheme. Under this Scheme, Persons of Indian Origin up to the fourth generation
(great grandparents) settled throughout the world, except for a few specified countries, and
would be eligible. The Card would be issued to eligible applicants through the concerned Indian
Embassies/High Commissions/Consulates and for those staying in India on a long term visa, the
concerned Foreigners Regional Registration Officer (Delhi, Mumbai, Calcutta, and Chennai)
would do the same. The fee for the card, which will have a validity of 20 years, would be
US$1000.
In this scheme, unless the context otherwise requires"Person of Indian origin" means a foreign citizen (not being a citizen of Pakistan, Bangladesh
and other countries as may be specified by the Central Government from time to time) if,
He/she at any time held an Indian passport; or
He/she or either of his/her parents or grandparents or great grandparents was born in and
permanently resident in India as defined in the Government of India Act, 1935 and other
territories that became part of India thereafter provided neither was at any time a citizen of
any of the aforesaid countries (as referred to in 2(b) above); or
He/she is a spouse of a citizen of India or a person of Indian origin covered under (I) or (ii)
above.
Besides making their journey back to their roots simpler, easier and smoother,

this Scheme

entitles the PIOs to a wide range of economic, financial, educational and cultural benefits. The
benefits envisaged under the Scheme include: No requirement of visa to visit India;
No requirement to register with the Foreigners Registration Officer if continuous stay does
not exceed 180 days. If continuous stay exceeds 180 days, then registration is required to be
2

NRI BANKING
done within a period of 30 days of the expiry of 180 days;
Parity with Non-Resident Indians in respect of facilities available to the latter in economic,
financial, educational fields etc. These facilities ill include:
Acquisition, holding, transfer and disposal of immovable properties in India except of
agricultural/plantation properties;
Admission of children in educational institutions in India under the general category quota for
NRIs- including medical/engineering colleges, IITs, IIMs etc.
Various housing schemes of Life Insurance Corporation of India, State Governments and
other Government agencies;
All future benefits that would be extended to NRIs would also be available to the PIO Card
holders;
However, they shall not enjoy political rights in India.
What is an OCB?
Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian
nationality or origin resident outside India and include overseas companies, partnership firms,
societies and other corporate bodies which are owned, directly or indirectly, to the extent of at
least 60% by individuals of Indian nationality or origin resident outside India as also overseas
trusts in which at least 60% of the beneficial interest is irrevocably held by such persons. Such
ownership interest should be actually held by them and not in the capacity as nominees. The
various facilities granted to NRIs are also available with certain exceptions to OCBs as long as
the ownership/beneficial interest held in them by NRIs continues to be at least 60%
What are the various facilities available to NRIs/OCBs?
NRIs/OCBs are granted the following facilities:
Maintenance of bank accounts in India.
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NRI BANKING
Investment in securities/shares of, and deposits with Indian firms/ companies.
Investments in immovable properties in India.
KEY BENEFITS
NRI-Banking follows a modular structure. The various modules render our NRI Banking
solution offerings (which are stated below) in a seamlessly integrated fashion.
The Masters module permits maximum parameterization to be done, enabling the end user to
make all changes with regard to Interest Rates or with regard to any changes as per directives
from

Head

Maintains

Office

Bank, Branch and

RBI.

holiday details

Facilitates maintenance of Instrument, Interest rate and overdue interest rate details Masters.
Inventory, Currency, Country, Exchange rate and return reason details are also maintained Favors
opening, authorization and freezing of Accounts Transaction entry and

passing is made easy

Provisions availed for issuing, passing and stop payment of cheese.

Supports

Account

Aids

Day

closure,
Begin,

Preclosure,
Day

Renewal
End

&

&

overdue

renewal

Month

End

of

Deposits.
Processing

Processes Quarterly, and transfer to Inoperative & Half Yearly - SB Interest Calculation.
Hastens Deposit Receipt Printing, Changing to RFC, Interest Payment & Overdue Process.
Supports Acceptance and Execution of standing instruction.
Types of accounts
NRI accounts

are maintained by banks which hold authorized dealers' licences from the Reserve

Bank of India. Some cooperative and commercial banks have also been specifically permitted to
maintain NRI accounts in rupees even though they are not authorized dealers. The financial
budget for 2007-08 extends NRI accounts to regional rural banks (RRBs) as well. This would
boost remittances from NRIs particularly in Bihar, Kerala, Uttar Pradesh and Gujarat where a
large number of persons from rural areas from these states are employed overseas.
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NRI BANKING
Banking Laws for NRIs allow for accounts with authorized dealers to be maintained in Indian
rupees and in foreign currency.
Various accounts: NRE A/c - non residential (external) rupee account.
FCNR-B A/c - foreign currency non residential account.
NRO A/c - nonresident ordinary account.
RFC A/c - resident foreign currency account.

All NRIs can open such accounts, with the exception of individuals residing in Pakistan and
Bangladesh, who require special permission from the RBI. Joint accounts of two or more nonresidents and nomination facility are permitted.
While the FCNR (B) is a term deposit only, the NRE and NRO accounts can be operated as
either savings, current, recurring or fixed deposit accounts. As for interest rates, FCNR (B) and
NRE are subject to a cap, and should not exceed the LIBOR/SWAP rates. In the case of NRO
accounts, rates are determined by the banks. The interest rates, currently at 3.5% apply to a
period of 1 to 3 years.
The total NRE/ FCNR deposits during 2006-2007, as per RBI statistics, are USD 37,751 million
and are expected to grow with regional rural banks also mopping up funds. Banks are expected
to offer lucrative interest rates to bolster NRI funds.
Banks offer two types of accounts to NRIs, based on their reparability.
Reparable Accounts
Funds that can be transferred or repatriated abroad are maintained in a Non Resident External
Bank account. Generally, funds remitted from outside India are credited to this account.
Investments made from foreign funds can be repatriated overseas, and such investments are
maintained in a Repatriable Demat account.
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NRI BANKING
Non-Resident (External) Rupee (NRE) Accounts
Both Principal and Interest can be repatriated/transferred out of India
Savings rate on NRE accounts is at par with savings rates in resident accounts
Term deposits can be made for 1 to 3 years.
The interest rates on (NRE) Term deposits cannot be higher than LIBOR/SWAP rates as on
the last working day of the previous month, for US dollar of corresponding maturity plus 50
basis points.
The interest rates on three year deposits also apply in case the maturity period exceeds three
years. The change in interest rate also applies to NRE deposits renewed after their present
maturity period.
FCNR (B) Accounts
As in NRE accounts, both principal and interest are repatriable.
Presently, deposits can be made in 6 specific foreign currencies (US Dollar,

Pound Sterling,

EURO, Japanese Yen, Australian Dollar and Canadian Dollar).

Interest rate- Fixed or floating within the limits of LIBOR/SWAP rates for the respective
currency/corresponding term minus 25 basis points (except Japanese Yen).
The term of deposits can range between 1 to5 years.
NRO Accounts
Only current earnings are repatriable.
Savings NRO accounts are normally operated to credit rupee income from shares, interest,
rent from property in India, etc.
In case of term deposits, banks are allowed to determine their own interest rates.
Banks can allow remittance up to USD 1 million per financial year for bonafide purposes from
balances in the NRO accounts once taxes are paid out. This limit includes the sale proceeds of
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NRI BANKING
immovable properties held by NRIs and PIOs.
Resident

Foreign

Currency

(RFC) Account

NRIs and PIOs returning to India can maintain an RFC account with an authorized bank in India
to transfer funds from their NRE/FCNR (B) accounts. Proceeds of assets held outside India
before their return to India can be credited to the RFC account. These funds are free from all
restrictions as to their utilization or in investment in any form outside India.
Non-Reparable Accounts
Non-repatriable funds are those which cannot be taken out of India. These have to be maintained
in a separate bank account i.e. a Non Resident Ordinary Bank account. Investments made from
non-repatriable accounts cannot be repatriated but have to be maintained in a Non-Repatriable
Demat account. Money once transferred from an NRE account to an NRO account cannot be
transferred back to an NRE account.
Non Resident Ordinary (NRO) Account
When a resident becomes an NRI, his existing savings account is designated as a Non-resident
Rupee (NRO) account.
The NRO accounts could be maintained in the nature of current, saving, recurring or term
deposits. NRIs can also open NRO accounts for depositing their funds from local transactions.
The interest earned from NRO accounts is accountable to tax laws.
NRO accounts can be opened in the name of NRIs who have left India to take up employment
or business temporarily or permanently in a foreign country.
Funds from NRO accounts are not repatriable or transferred to NRE accounts without the
prior approval of the RBI.
However, NRIs, PIOs, Foreign Nationals, retired employees or non-resident widows of Indian
citizens can remit, through the Authorized Dealer, up to USD one million per calendar year from
the NRO account or from income from sale of assets in India
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NRI BANKING

OPENING OF NRI ACCOUNT

HOW TO OPEN NRI ACCOUNTS WITH A BRANCH IN INDIA
To open an NRE account please complete the account opening form and mail it to the branch of
your choice along with ;
Passport copy
Visa/residence permit
2 photographs
initial money remittance
Your signature may be verified by anyone of the following;
Indian Embassy/consulate
Any person known to the Bank
Notary public
Any of our offices abroad
You can open
NRE Saving Bank a/c / Current Accounts
Fixed Deposits in Indian Rupees
Fixed Deposits in Foreign Currency
NRO accounts (Rupee accounts for crediting income in India )
You can authorize a resident to operate your account through a Power of Attorney or Letter of Authority

Nomination Facility available (Nominee can be a resident Indian also)

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NRI BANKING
Procedures & Benefits:
Non-Resident accounts can be opened along with your remittances through banking channel.
Photograph shall be enclosed with the opening form.
There is no ceiling on the amounts remitted for your credit in Non-Resident account.
When the NRI depositor returns to India, the NRE account will be automatically treated as
Resident account. However NRE term deposit will continue to earn same rate till maturity
even after such conversion.
NRE accounts earn more interest than domestic deposits.
Nomination facilities are available for registration in favor of a non resident or resident.
Loans against deposits are allowed for purposes other than investment up to 90% of the
deposit.
The income from deposit is free from Indian Income Tax.
It is also free from Gift tax for one time gifting.
Documents Required:In case account opened in person:
Indian passport with overseas resident address or work permit (i.e. Green Card as residence
permit for USA, H1 Visa as work permit for USA or Hongkong ID card for residence of
Hongkong)
Separate proof of Non Resident status if the passport holds Indian address and resident Visa
permit is not included in passport. Photograph of individual account holder
For persons employed with foreign shipping company
Initial work contract
Last wage slip
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NRI BANKING
For contract employees
Last work contract
Letter from local agent confirming next date of joining the foreign vessel (not more than six
months from date of last return to India)
Principal's overseas address or current work contract
In case of documents sent by mail
All the relevant above mentioned documents / signatures to be attested by any one of the
following:
Indian embassy overseas notary
Local bank
Minimum balance in which one can open an account (Differs from bank to bank):NRO Saving Account Rs.5, 000/NRO - Current Account Rs.10, 000/NRO Term Deposit Account Rs.5, 000/NRE Savings Account Rs.5, 000/NRE Current Account Rs.10, 000/NRE Term Deposit Account Rs.10, 000/FCNR Term Deposit Account USD 500/- or its equivalent in GBP or Euro
If you submit the money for opening/credit to an account. Frequency of Interest payment on
accounts:
NRO Term Deposit Account Half yearly
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NRI BANKING
NRE Savings Account Quarterly
NRE Term Deposit Account Half yearly
FCNR Term Deposit Account Quarterly

Opening of JOINT ACCOUNTS:-

Type of account

Joint Account with

Joint Account with Non-

Resident Indians

Resident Indians

NRO

Yes

Yes

NRE

No

Yes

FCNR

No

Yes

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NRI BANKING

CHAPTER 2 NRI DEFINITION- UNDER FOREIGN EXCHANGE

MANAGEMENT ACT, 1999
Definition of an NRI:
Introduction:
An Indian abroad is popularly known as an NRI but the same has two important definitions one coined under the Foreign Exchange Management Act, 1999 [FEMA] and the other as per
the Income Tax Act, 1961.
FEMA definition:
The most relevant definition concerning an NRI's various bank accounts and investments in
movable and immovable properties in India

is the one

provided by Foreign Exchange

Management Act, 1999 [FEMA], which has replaced the Foreign Exchange Regulation Act ,
1973- [FERA] with effect from June 1,2000.
Person Residing outside India is the term used for an NRI, being a person who has gone out
of India or who stays outside India for the purpose of employment or carrying on business or
vocation outside India or any other circumstances which indicate his intention to stay
outside India for an uncertain period.
Section 2(v) of FEMA, 1999
Person resident in India" means

a person residing in India for more than one hundred and eighty-two days during the course of
the preceding financial year but does not include

a person who has gone out of India or who stays outside India, in either case

(a) For or on taking up employment outside India, or

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NRI BANKING
(b) For carrying on outside India a business or vocation outside India, or
(c) For any other purpose, in such circumstances as would indicate his intention to stay outside
India for an uncertain period;
a person who has come to or stays in India, in either case, otherwise than

for or on taking up employment in India, or

for carrying on in India a business or vocation in India, or

for any other purpose, in such circumstances as would indicate his intention to stay in India
for an uncertain period;

(a) Any person or body corporate registered or incorporated in India,

(b) An office, branch or agency in India owned or controlled by a person resident outside India,
(c) An office, branch or agency outside India owned or controlled by a person resident in India;
2(w) "person resident outside India" means a person who is not resident in India;
Non Resident Indian, the phrase is for the first time defined in the regulations as a person
resident outside India who is either a citizen of India or a person of Indian Origin".
Recently RBI has clarified that students studying abroad also be treated as NRIs under FEMA
and accordingly be eligible for foreign investments and NRE/FCNR a/cs
And the definition of a person resident outside India is simply put as a person who is not
Resident in India."
NOW, reading both the definitions together, it can be summarized that both:

an Indian Citizen residing outside India and also

A Foreign Citizen of Indian origin residing outside India are defined as Non-Resident Indians.

Person of Indian Origin:

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NRI BANKING
F.E.M.(Deposit) Regulations define a Person of Indian Origin (PIO) as:
A person, being a citizen of any country other than Pakistan and Bangladesh,

who at any

time held an Indian Passport. or

a person who himself or either of his parents or any of his grandparents were citizens of India,

or

a spouse of an Indian citizen, or

A spouse of a person covered under (i) or (ii) above.

2(xii) 'Person of Indian Origin' means a citizen of any country other than Bangladesh or Pakistan,
if

he at any time held Indian passport; or

he or either of his parents or any of his grand- parents was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955) or

the person is a spouse of an Indian citizen or a person referred to in sub-clause

Person of Indian Origin (PIO) defined under Regulations re: Immovable Property in India:

This definition is further narrowed when it comes to rules regarding acquisition and transfer of
immovable property in India. Probably with an intention of ensuring & restricting control of
immovable properties in the hands of strictly defined persons of Indian Origin only, this
definition is further narrowed to exclude individuals being citizens of Pakistan, Bangladesh, Sri
Lanka, Afghanistan, China, Iran, Nepal and Bhutan.
As regards immovable property transactions it may be noted that herein the person's father or
grandfather is included unlike parents or grandparents and spouse in earlier definition.
Accordingly a Person of Indian Origin is defined herein as:
a) Who held an Indian Passport at any time?
An individual other than citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran,
14

NRI BANKING
Nepal and Bhutan, or
b) Who himself or his father or grandfather was a citizen of India.
[Regulation 2(c) of F.E.M. (Acquisition and Transfer of Immovable Property in India)
Regulation 2000]
2(c) 'a person of Indian origin' means an individual (not being a citizen of Pakistan or
Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
(a) At any time, held Indian passport; OR
(b) Who or either of whose father or whose grandfather was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955);
Conditions of number of days stay in India: No doubt, Foreign Exchange Management Act, 1999 definition has also incorporated an NRI's
stay of 182 days or less during a year in India, but simply speaking if a person of Indian origin
has gone out of India for settlement he is to be treated as an NRI irrespective of number of days
he has stayed in India.
Stay in India during visits:
The Act also lays down that such a person will continue to be an NRI during his visit/stay in
India provided he has not returned to India for taking up employment or carrying on business
or vacation or any other circumstances as would indicate his intention to stay in India for an
uncertain period. Accordingly, an NRI settled abroad, irrespective of the number of days stay in
India will continue to be an NRI during his visit to India provided he has not returned to India
for permanent settlement.
"Overseas Corporate Body" (OCB) means a Company, Partnership Firm, Society etc. wherein
60 % or more ownership lies with NRIs or a Trust wherein 60 % or more financial interest is
irrevocably held by NRIs.
Conclusion:
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NRI BANKING
At the cost of repetition, it is once again said that an NRI permanently settled and residing
outside India will continue to be treated as an NRI under F.E.M.A.irrespective of the number of
days of his stay in India or otherwise

CHAPTER 3-DEPOSITORY
Non-Resident (External) Account - NRE Account
Eligibility Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can open and maintain NRE
accounts with authorized dealers and with banks (including co-operative banks) authorized by
the Reserve Bank of India (RBI) to maintain

such

accounts.

The account has to be opened by the Non Resident account holder himself and not by the holder
of the power of attorney in India.
Opening NRE accounts in the names of individuals/entities of Bangladesh/Pakistan
nationality/ownership requires approval of RBI
Types of Accounts - Savings, Current, Recurring or Fixed Deposit accounts.
Debits &

Credits:

Payments for local expenses and investments are allowed freely. Credits to an account, of funds
emanating from a local source would be permissible only if the funds are of a repatriable nature.
Permitted Credits

Proceeds of remittances to India can be in any permitted currency.

Proceeds of personal cheques drawn by the account holder on his foreign currency account
and of travelers cheques, bank drafts payable in any permitted currency including instruments
expressed in Indian rupees for which reimbursement will be received in foreign currency,
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NRI BANKING
deposited by the account holder in person during his temporary visit to India provided the
authorized dealer/bank is satisfied that the account holder is still resident outside India, the
travelers cheques/drafts are standing/endorsed in the name of the account holder and in the
case of travelers cheques, and they were issued outside India.
Proceeds of foreign currency/bank notes tendered by account holder during his temporary

visit to India, provided

(i) the amount was declared on a Currency Declaration Form (CDF), where applicable,
and
(ii) the notes are tendered to the authorized dealer in person by the account holder himself and
the authorized dealer is satisfied that account holder is a person resident outside India.
Permitted Debits

Local disbursements

Remittances outside India

Transfer to NRE/FCNR accounts of the account holder or any other person eligible to maintain
such account.
Investment in shares/securities/commercial paper of an Indian company or for purchase of

immovable property in India within prescribed regulations.

Any other transaction if covered under general or special permission granted by the Reserve

Bank.
Rate of Interest - as per the directives of the Reserve Bank of India.
Loans against Security of Funds held in the Account

To the account holder

I) for personal purposes or for carrying on business activities (except agricultural/plantation
activities/investment
ii)

For

making

in
direct

investment

real
in

estate
India

on

business).
non-repatriation

basis.
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NRI BANKING
iii)

For

acquisition

of

flat/house

in

India

for

his

own

residential

use.

In January 2007, the RBI imposed a restriction on loans against deposits and securities for NRIs
to a maximum of up to Rest. 20 lakh

To third parties
the loan should be utilized for personal purposes or for carrying on business activities (other
than agricultural/plantation activities/real estate business). The loan should not be utilized for
re-lending.

Loans outside India

Authorized dealers may allow their overseas branches/correspondents to grant fund based
and/or non-fund based facilities to Non Resident depositors against the security of funds held
in the NRE accounts and also agree to remittance of funds from India if necessary, for
liquidation of debts.

Change of Resident Status of Account Holder

NRE Accounts should be re designated as resident account or the funds held in these accounts
may be transferred to the Resident Foreign Currency (RFC) Accounts (if the account holder is
eligible for maintaining RFC Account) at the option of the account holder immediately upon
the return of the account holder to India (except where the account holder is on a short visit to
India).
Repatriation of funds to Non Resident Nominee can be permitted by the authorized dealer or
bank in the case of an account holder who is deceased.
Other Features Joint Accounts - in the names of two or more Non Resident individuals may be opened
provided all the account holders are persons of Indian nationality or origin. When one of the
joint holder become residents, the authorized dealer may either delete his name or allow the
account to continue as NRE account or redesignate the account as resident account at the
option of the account holders. Opening of these accounts by a Non Resident jointly with a
18

NRI BANKING
resident is not permissible.
An Account may be opened in the name of eligible NRI during his temporary visit to India.
Operation by Power of Attorney - Resident Power of Attorney holder can operate on the NRE
accounts but only for local payments to be made on behalf of the account holder. The Power
of Attorney (POA) holder cannot credit proceeds of foreign currency notes/bank notes and
travellers cheques to the NRE accounts.
In cases where the account holder or a bank designated by him has been granted permission by
Reserve Bank to make investments in India, the POA holder is permitted to operate the
account to facilitate such investments. POA holders cannot, however, make gifts from NRE
accounts.

Foreign Currency (Non-Resident Indians) FCNR (B) Account

Eligibility to Open and Maintain FCNR A/c
With the exception of persons of Indian origin from Bangladesh and Pakistan, all NRIs and
PIOs are eligible to maintain an FCNR account with an authorised bank in India.
Accounts may be opened with funds remitted from outside, existing NRE/ FCNR accounts,
etc.
Remittances should be in the designated currency.
Conversion to currency other than the designated currency also permitted at the risk and cost
of the remitter.
Features of FCNR Account
The account can be opened with funds remitted from abroad, or transferred from an existing
NRE/FCNR account.
FCNR accounts can be opened with designated currencies, which are: GBP, USD, Deutsche
Mark, Japanese Yen and the Euro.
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NRI BANKING
Conversion to another designated currency is permitted at a cost to the account holder.
Only term deposits can be maintained in FCNR accounts, in a time range of 6 months to 3
years.
As per RBI guidelines, banks are free to offer interest on FCNR deposits below LIBOR rates,
less 25 basis points for deposits between 6 months to one year, and LIBOR rates plus 50 basis
points for deposits over a year.
Banks are also free to decide on a fixed or a floating rate of interest on FCNR term deposits.
Interest rates are reviewed periodically and determined by directives from the Reserve Bank
(Department of Banking Operations and Development).
The account holder can choose the periodicity of interest, from half-yearly to annual payments.
The interest can be credited to a new FCNR (B) account or a NRE/NRO account.
For permissible debits and credits, the regulations for FCNR accounts are similar to the NRE
accounts.
For conversion of currencies, from designated currency to rupees and vice versa, the days rate
of conversion will apply.
Funds from the FCNR account are allowed to move within the country at no extra cost to the
account holder.
For loans and overdrafts against FCNR accounts, the same conditions as the NRE accounts
apply.
In case of premature withdrawal of the FCNR Term Deposit, a penalty is levied. Interest paid
on the account is calculated at a
1% below the committed rate if accounts are closed prematurely.
However, no interest is paid on deposits held for less than 6 months, and a penalty would have
to be paid as per directives from the apex bank. The RBI guidelines prevail on these terms,
issued as and when required.
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NRI BANKING
FCNR A/c after Change in Resident Status
NRI deposits such as the FCNR can continue till the maturity date at the contracted rate of
interest even after the account holders resident status changes to resident Indian.
However, except for interest rates and reserve requirements of FCNR deposits, these accounts
are treated as resident accounts effective from the account holders date of return to India.
On maturity, these accounts are converted to either an RFC account or the Resident Rupee
Deposit account.
As for joint accounts, the same rules as those for NRE accounts apply to FCNR deposits too.
For repatriation of funds from the FCNR account, the same conditions as those for NRE
accounts apply.
The RBI does not provide any guarantee on foreign exchange.
Other Features Reserve Bank will not provide foreign exchange guarantee.
Lending of resources mobilized by authorized dealers under these accounts are not subject to
any interest rate stipulations.
Non-Resident Ordinary Rupee (NRO) Account
Eligibility
Any person or entity residing outside India is entitled to open a NRO account with an
authorised dealer or an authorised bank for transactions conducted in Indian Rupees.
Individuals or entities of Bangladeshi or Pakistani nationality or ownership require approval
from the RBI.
Types of Accounts
NRO accounts can be opened as current, savings, recurring or fixed deposit accounts. The RBI
determines the rate of interest on these accounts and issues guidelines for opening, operating and
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NRI BANKING
maintaining them.

Joint Accounts with Residents/Non-residents

Joint accounts are permitted with resident and non-residents.
Permissible Credits/Debits Credits Remittances from outside India through normal banking channels received in freely
convertible foreign currency.
Any freely convertible foreign currency can be deposited into the account during the account
holder's visit to India. Foreign currency exceeding USD 5000/- or its equivalent in the form of
cash has to be supported by a Currency Declaration Form. Rupee funds must be supported by
an Encashment Certificate, if they are funds brought from outside India.
Current income earned in India, such as rent, dividend, pension or interest. Even proceeds
from sale of assets including immovable property acquired out of rupee or foreign currency
funds or through inheritance.
Debits All payments towards expenses and investments in India
Payment outside India of current income like rent, dividend, pension, interest etc. in India of
the account holder.
Repatriation up to USD One million, per calendar year, for all bonafide purposes with the
approval of the authorised dealer.
Remittance

of

Assets

NRIs and PIO may remit upto USD One million per calendar year, out of balances held in the
NRO account which could be acquired from the sale proceeds of assets acquired in India out of
rupee or foreign currency funds or by way of inheritance from a resident Indian, provided:
22

NRI BANKING
Assets acquired in India out of rupee/foreign currency funds
(a) Immovable property: NRIs and PIO may remit sale proceeds of immovable property
purchased by them when they were resident or out of Rupee

funds as NRI

or

PIO.
(b) Other financial assets: There is no lock-in period for remittance of sale proceeds of other
financial assets
Assets acquired by way of inheritance:
Sale proceeds of assets acquired through inheritance can be remitted. No lock-in period applies
here if the authorised dealer is satisfied that the proceeds are from inherited property.
Remittance of assets out of NRO account by a person resident outside India other than
NRI/PIO
a foreign national who is not a citizen of Pakistan, Bangladesh, Nepal or Bhutan and who
has retired as an employee in India,
has inherited assets from a resident Indian, or
is a widow residing outside India and has inherited assets of her deceased husband who was a
resident Indian can remit upto USD one million per calendar year on production of
documentary evidence to support the acquisition by way of inheritance or legacy of assets to
the authorised dealer.
Restrictions
The above facility of repatriation from sale of immovable property is not extended to citizens of
Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan. Remittance of sale
proceeds from other financial assets is not extended to citizens of Pakistan, Bangladesh, Nepal
and Bhutan.
Foreign Nationals of non-Indian origin on a visit to India
Foreign nationals of non-Indian origin are permitted to open a NRO account (current/savings) on
their visit to India with funds remitted from outside India through normal banking channels or by
foreign exchange brought to India. The balance in the NRO account is converted by the bank into
23

NRI BANKING
foreign currency for payment to the account holder when he leaves India, provided the account
was maintained for less than six months. The account should not be credited with any local funds
during the term, except for interest accrued on it.
Grant of Loans/ Overdrafts by Authorised Dealers/ Bank to Account Holders and Third
parties
Loans to NRI account holders and to third parties is granted in Indian Rupees by authorized
dealers (banks) against the security of fixed deposits provided:
The loans are utilized only for meeting the borrower's personal requirements or for business
and not for agricultural/plantation /real estate or relending activities
RBI regulations pertaining to margin and rate of interest will apply
All norms and considerations which apply to loans to trade and industry will apply to loans
and facilities granted to third parties.
The authorized dealer/bank may allow an overdraft to the account holder subject to his
commercial discretion and compliance with the interest rate directives.
Change of Resident Status of Account holder (a) From Resident to Non-resident
When a resident Indian leaves India for taking up employment or for carrying on business
outside India, his existing account is designated as a Non-Resident (Ordinary) Account, except in
the case of persons shifting to Bhutan and Nepal. For the latter, the resident accounts do not
change to NRO accounts.
(b) From Non-Resident

to Resident

NRO accounts may be re-designated as resident rupee accounts once the account holder returns
to India for taking up employment, or for carrying on business or for any other purpose
indicating his objective to stay in India for an uncertain period. Where the account holder is only
on a temporary visit to India, the account continues to be treated as non-resident during the visit.
24

NRI BANKING
Treatment of Loans/ Overdrafts in the Event of Change in the Resident Status of the
Borrower
In case of a resident Indian who had availed of loan or overdraft facilities while resident in India
and who subsequently becomes a NRI, the authorised dealer may at its discretion allow the loan
facility to continue. In this case, payment of interest and repayment of loan may be made by
inward remittance or out of bonafide resources in India.
Payment of

funds to Non-resident/Resident Nominee

The amount payable to a non-resident nominee from the NRO account of a deceased account
holder is credited to the NRO account of the nominee.
Facilities to a person going abroad for studies
Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for
all the facilities enjoyed by NRIs. All loans availed of by them as residents in India will continue
to be extended as per FEMA regulations.
International Credit Cards
Authorized dealers are allowed to issue International Credit Cards to NRIs and PIO, without the
permission of the RBI. Such transactions can be made by inward remittance or out of balances
held in the cardholder's FCNR/NRE/NRO Accounts.
Income Tax
The remittances, after payment of tax are allowed to be made by the authorized dealers on
production of a statement by the remitter and a Certificate from a Chartered Accountant in the
formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, and Government
of India

TAX BENEFITS for NRIs

Interest on NRE & FCNR deposits are free of income tax.

25

NRI BANKING

Tax @ 30% will be deducted at source on all interest income in NRO accounts.

On permanent return to India, income on all investments out of foreign exchange funds would
be eligible for a flat tax rate of 20% (excluding surcharge) till maturity of the investments.

CHAPTER 4-SERVICES OFFERED BY VARIOUS BANKS

BANKING SERVICES
NRI banking services including deposits, savings accounts, finance like home loans, personal
loans etc. Various banks like ICICI Bank, Citibank, HDFC Bank and many other nationalized
and private banks that hold authorized dealer's licenses from the Reserve Bank of India (RBI)
provide

remittances,

savings,

earnings,

investments

and

repatriation

services.

Besides the major commercial banks, certain cooperative and regional rural banks (RRB's) have
also been specifically permitted to maintain NRI accounts. This would increase NRI remittances
in Bihar, Kerala, U.P. and Gujarat where a large chunk of the rural population have settled
abroad.
26

NRI BANKING
The banks also offer finance services to the NRI's that cover home loans for buying new
residential property, housing renovation loans for constructing or modifying on the existing
properties, personal loans and other loan products.
Another FDI (Foreign Direct Investment) magnet has been the various money transfer services
provided. Various banks provide quick, convenient and economical fund remit to India. These
include:
Online remittance services
Remittance of funds to partner exchange houses in India
Telegraphic or wire transfer
Fund transfer through cheques/ DD's and Travelers' cheques.
Many banks also offer Demat account services to the NRI's that enable NRI's online stock
investment and share trading services. Special NRI credit cards acceptable globally are available
with various banks. These specialized services and banking accounts have drawn enormous NRI
funds to India.
SERVICE OFFERED BY ICICI BANK:Rupee plus plan: - At ICICI Bank, we believe in providing you with the most competitive
returns on your hard earned money. Now you can earn even higher returns on your deposits by
investing in Rupee plus plan.
What does the Rupee plus plan offer you: - NRE-FD interest rates rate being regulated by
RBI, is nearly same across banks? In Rupee plus plan we have devised a way to make your
money work harder and smarter and earn higher returns in terms of NRI as compared to a NRE
FD.
Currencies: - you can being funds in any convertible currency, which will be converted to USD
(if not in USD already).
Minimum Deposit: - USD 25,000 or equivalent.
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NRI BANKING
Tenor: - for 1 year only.
How does the Rupee plus plan work? Instead of putting the money in NRE FD directly, the
money is put in USD denominated FCNR. This FCNR earns interest as per prevailing FCNR
interest rates.
Additionally, at the time of booking the FCNR a Forward Agreement is also drawn to exchange
the maturity amount of USD to Rupees at a given rate (Forward Rate).
Rupee plus plan advantage: - on an average the returns are significantly higher compared to
putting your money in NRE FD as per the prevailing market rates. Returns in rupee terms are
assured once the deal is booked irrespective of the future movements in currency markets.
The following banking facilities are available to NRIs, as per the current RBI/FEMA
guidelines.

Particulars

Who can open an

Foreign Currency

Non-Resident

(Non-Resident)

(External) Rupee

Account (Banks)

Account

Scheme(FCNR(B)

Scheme(NRE

Account)
NRIs/PIOs

Account)
NRIs/PIOs

account

(Non-Resident
Ordinary Rupee
Account Scheme(NRO
Account)
Any person resident
outside India (other
than a person resident

In the names of two or In the names of two

in Nepal and Bhutan)

May be held jointly

NRIs

or more NRIs

with residents

Nomination

Permitted

Permitted

Permitted

Currency in which

Pound Sterling, US

Indian Rupees

Indian Rupees

account

Dollar, Jap. Yen or

Joint account

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NRI BANKING
is denominated

Euro. Australian Dollar,

Repatriability

Canadian Dollar
Repatriable

Repatriable

Non-repatriable*

Type of Account

Term Deposit only

Savings, Current,

Savings, Current,

Recurring, Fixed

Recurring, Fixed

Rate of Interest

Deposit
Subject to cap: LIBOR Rate of interest on

Deposit
Rate of interest on

minus 25 basis points

domestic savings

domestic savings

except in case of

account will also be

account will also be

Japanese Yen where the applicable to NRE

applicable to NRO

cap would be based on savings account. For savings account. For

at the prevailing LIBORFixed Deposits, the
rates

Fixed Deposits, the

rates can be fixed by rates can be fixed by

banks subject to

banks subject to

ceilings prescribed by ceilings prescribed by

RBI

Tax Aspects

RBI

Interest income tax free Interest income tax

Interest income taxable

and no tax deduction at free and no tax

and liable for TDS

source.

deduction at source. @30% plus applicable

surcharge subject to
conditions. DTAA
benefit may be
available subject to
fulfillment of
conditions.

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NRI BANKING

CHAPTER 5.RBI ISSUE GUIDELINE FOR MONEY TRANSFER

MONEY TRANSFER
Money can be transferred either through on line or drafts or telegraphically or by wire transfer or
Cheques. E-Transfer is completely online, paperless money transfer service which enables the
customer to send money directly from one bank account in foreign country to India. Drafts in
Indian rupees can be purchased from exchange companies of one country and mailed to the
branch of another country where the customer has the account. Telegraphic or wire transfers can
be made through branch to branch. Cheques can be deposited for credit of the customers
accounts and the Cheques will be collected and credited to their accounts.
International SWIFT Transfer
This is a secure, quick and efficient method of transferring funds, which enables you to send
money easily to any bank which is part of the SWIFT network. There is a flat-rate charge of Rs
500 for each SWIFT transfer made from your account. There is no charge when you make a
transfer from your Barclays NRI account in India to a Barclays account in UK or UAE.
Demand (or Banker's) Draft
This is a means of initiating a transfer from your account to a named payee. You can send the
Demand Draft to your intended payee, who will then be able to take the Draft into their bank
30

NRI BANKING
following presentation of this Draft, he/she will then receive payment.
A Demand Draft made payable to a non-Barclays account will incur a charge of Rs 3.5 per Rs
1,000 sent (minimum charge Rs 100).
A Demand Draft made payable to a Barclays account and a Foreign currency DD will incur a
flat-rate charge of Rs 300.
UAE EXCHANGE
PROVIDING speed, convenience and security of transactions, the Xpress Money Service of
UAE Exchange company is proving to be a modern and reliable way of sending and receiving
money from anywhere in the world, especially among the immigrant Indian in Gulf countries.
With an extensive network of branches in UAE and a global presence in Australia, India, Kuwait,
Oman, Qatar, UK, USA, Fiji, Sri Lanka and Bangladesh, the UAE Exchange Centre specializes
in Fund Transfer across the globe and enjoys a numerous uno status in the industry. UAE
Exchange and Financial Services Ltd makes 80,000 remittances a month. The average amount of
remittances per transfer is Rest 1, 25,000.
Western Union Money Transfer
Western Union is a global leader in money transfer services, with a history of pioneering dating
back more than 150 years. Non-resident Indians can now transfer their funds to India through the
Money Transfer Service offered by Western Union. This service is currently available for inward
remittances in India. Credits to NRE/FCNR accounts are not permitted to be routed through
Money Transfer Service Scheme (MTSS)"
SENDWISE:A rupee demand draft delivered to the recipients doorstep within three to four working days and
can be encashed at any nationalized bank in India.
MONEYGRAM Send money online today:You can send money around the world online to over 84,000 moneygram agent locations, in
31

NRI BANKING
more than 170 countries. Not only is sending money with moneygram safe and convenient,
youll find the same day services to be one fastest way to send your money online-usually
arriving within minutes. Send money online or at a moneygram agent location near you.
Moneygram is a global leader in international money transfers and the largest processor of
money orders in the U.S.

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NRI BANKING

CHAPTER 6-NRI INVESTMENTS

The Government of India has adopted a liberal policy, with respect to investment by NRIs and
OCBs in India, such investment are allowed, both, through the RBI route and also through the
Government route, i.e., through the Foreign Investment Promotion Board (FIPB) NRIs and
OCBs are permitted to invest up to 100% equity in real estate development activity and civil
aviation sectors. Investment, made by the NRIs and OCBs, are fully repatriable, except in the
case of real estate, which has a 3 year lock-in period on original investment and, 16% cap on
dividend repatriation.
Various investment opportunities in India available to NRIs: If one is NRI, the following investment opportunities are open to you:
Maintenance of bank accounts in India.
Investment in securities/shares and deposits of Indian firms/companies.
Investment in mutual funds in India.
Investment Policy for Non-resident Indians (NRIs):Recognizing the investment potential of the Non-resident Indians, a number of steps are being
taken by the government on an ongoing basis to attract from them in Indian companies. Some of
the investment schemes presently available to Non-resident Indians (NRIs) include the facility to
invest upto 100 percent equity with full benefits of repatriation of capital invested and income
accruing thereon in high priority industries mentioned in the Annexure-III to the industrial policy
1991, 100 percent export oriented units, sick units under revival, housing and real estate
development companies, etc,. NRIs/PIOs/OCBs are also permitted to make portfolio investments
through secondary markets. In terms of the relaxations announced in 1998-99, investment limits
for an individual NRI has been revised upwards from 1% to 5%, aggregate portfolio investment
limits by all NRIs increased from 55 to 10% of the issued and paid-up capital of the company.
The aggregate investment limit would be separate and exclusive of FII portfolio investment
limits.
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NRI BANKING

FOR NRIS INVESTMENT:In order to help the tax-payers to plan their Income-tax affairs well in advance and to avoid long
drawn and expensive litigation, a scheme of Advance Rulings has been introduced under the
Income-Tax Act, 1961. Authority for advance rulings has been constituted. The tax-payer can
obtain a binding ruling from the Authority on issues which could arise in the determination of his
tax liability. A non-resident or certain categories of resident can obtain binding rulings from the
Authority on any question of law or fact arising out of any transaction/proposed transactions
which are relevant for the determination of this tax liability.
PORTFOLIO INVESTMENT
NRIs/OCBs are permitted to make portfolio investment in shares/debentures (convertible and
non-convertible) of Indian companies, with or without repatriation benefit provided the purchase
is made through a stock exchange and also through designated branch of an authorized dealer.
NRIs/OCBs are required to designate only one branch authorized by Reserve Bank for this
purpose.
NRIS INTEREST:NRIs invested only 5% of their investible assets in India with the balance being parked overseas.
A major reason for this was that the Indian banking system was not a very preferred and trusted
mode of investment for the NRI. The customer was looking for convenience, speed, high yield
on investment with manageable risks, reasonable costs and quality services A face of India he
could associate with. Competition was not only from India based banks, but also from local
banks based overseas; conventional and non conventional routes of money transfer.
FACILITATION AGENCIES
The main regulatory and facilitation agencies involved in the matters related to NRIs/OCBs
investment are Reserve Bank of India (RBI), Securities and Exchange Board of India (SWBI),
Authority for Advance Rulings (AAR), Secretariat for Industrial Assistance (SIA), Ministry of
34

NRI BANKING
Commerce and Industry; and Office of the Chief Commissioner (Investments & NRIs).
RBI FORMS
NRIs/OCBs/PIOs do not have to seek specific permission for approved activities covered under
General permission schemes. The activities relating to NRIs/OCBs/PIOs not covered under
those schemes either require declaration to RBI or permission from RBI. The activities requiring
Declaration/Permission along with corresponding forms are as under;

TS 1

Transfer of Shares/Debentures by Non-residents to Residents

FNC

Permission to establish a branch office in India by an Overseas Company establishing a

Representative Office by Overseas Company for Liaison Activities to open a

Project/Site Office in India.

IPI

Company/Individual (declaration) acquiring property

35

NRI BANKING

CHAPTER 7-NRI INVESTMENT IN IMMOVABLE PROPERTY IN INDIA

NRIs, irrespective of their citizenship can freely acquire and transfer residential as also
commercial properties in India barring agricultural land and plantation, with repatriation of
foreign exchange equivalent of cost of acquisition (maxi. two in case of resi.houses) and no
restrictions as regards holding period.

Rules for Acquisition & Transfer by NRIs being:

Indian citizen & Foreign citizen

Mode of Payment

Joint Holding / Restrictions

Repatriation of Sale Proceeds

Taxation of Capital Gains & Wealth-Tax

Rules for Acquisition & Transfer by Foreign Citizen NRIs
Purchase / Acquisition:
There is a general permission to acquire any immovable property (other than agricultural land,
plantation or farm-house property) by way of purchase, provided the payment is made out of
foreign exchange inward remittance or any Non Resident bank account in India,
i.e.NR(E),FCNR(B) or NRO a/c..
Acquisition by way of Gift:
General permission is granted to acquire any immovable property (other than agricultural land,
plantation or farmhouse property) by way of gift from a person (donor) who is
A person resident in India, or
Adperson resident outside India (an NRI) who is Indian citizen or foreign citizen of Indian
origin.
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NRI BANKING

Acquisition by way of inheritance:

General permission is granted for inheritance of immovable property including
agricultural land, plantation or farm-house property from
A person resident in India, or
A person resident outside India who may be an Indian citizen or foreign citizen of Indian
origin provided such person had acquired said property in accordance with the provisions of
Foreign Exchange Law in force at the time of acquisition. I.e. FERA, 1973 or FEMA 1999.
Hence Agricultural land, plantation or farmhouse property

can be acquired by way of

inheritance only.
Transfer / Sale:
General permission is granted for sale of any immovable property (other than agricultural land,
plantation or farmhouse property) to a person who is resident in India.
Transfer of residential or commercial property by way of gift:
General permission is granted to gift residential or commercial property to
A person resident in India, or
A person resident outside India who may be an Indian citizen or foreign citizen of Indian

origin,
Transfer of agricultural land, plantation or farmhouse property by sale/ gift
General permission is granted to sell or gift such property to a person who is resident in India
and also an Indian citizen.
Mode of Payment:-

37

NRI BANKING
The payment for purchase of immovable properties is required to be made from NRI's bank

account, being:
a) Non Resident External Account (NRE);
b) Foreign Currency Non Resident (B) Account (FCNR) (B), or
c) Non Resident Ordinary Account (NRO), or
d) Foreign Exchange Inward Remittance from abroad.

It is advisable to retain records of payment made i.e. bankers certificate

All incidental expenses such as stamp duty, registration fees etc. should also be paid through
bank only.

Repatriation of Sale proceeds

An NRI being an Indian citizen or a foreign citizen of Indian origin is allowed to repatriate
the sale proceeds of an immovable property subject to the following conditions:

a) . The acquisition should be in accordance with the existing Foreign

Exchange Laws (i.e.

FERA, 73 or FEMA 99).

b) the purchase price was met out of Foreign Exchange Inward Remittance or NRE / FCNR (B )
account, and
c) In case of residential properties, repatriation is restricted to a maximum of two properties.
It may be noted that the eligibility criteria of holding period of 3 years for repatriation is
removed w.e.f. 29-06-02. [Vide notification no FEMA 65/2002 RB dated 29-06-02.]4
It may be noted that there are no restrictions as re: repatriation of sale proceeds vis-a-vis
number of commercial or industrial properties.
The amount of repatriation is restricted to foreign exchange equivalent of the purchase price
i.e. profits / gains are not allowed to be repatriated.
38

NRI BANKING

39

NRI BANKING

CHAPTER 8. PAN CARD FOR NRIS

For all Indian citizens who are liable to pay tax under the Income Tax Act, 1961, or are required
to enter into financial transactions in India, it is mandatory to have a Permanent Account
Number.
The Permanent Account Number (PAN) is a combination of 10 alphanumeric numbers issued by
the Income Tax Department. The Department has entrusted UTI Investor Services Ltd. (UTIISL)
with the task of managing IT PAN Service Centers wherever the IT department has an office in
the country. The National Securities Depository Limited (NSDL) has also been engaged to allot
PAN cards from TIN Facilitation centers.
Applying for a PAN
Form 49A, which is the application form for a PAN, can be downloaded from the Income Tax,
UTIISL and NDSL websites:
www.incometaxindia.gov.in & www.utiisl.co.intin.nsdl.com
The forms care also available at the IT PAN Service Centers and TIN Facilitation Centers. A
tatkal or priority service has been provided for, to enable speedy allotment of the PAN card
through the Internet. The PAN is allotted through e-mail on priority in 5 days as against the
normal 15 days to the applicant upon online payment through a credit card. The PAN has lifetime
validity.
The necessity for a PAN Card to NRIs
Apart from income returns which must carry the PAN, it is mandatory to submit the PAN in all
financial transactions, like the purchase and sale of property in India, payments for purchase of
vehicles, foreign visits, securing a telephone connection or making time deposits in a bank
worth over Rs.50,000.
For NRIs, PAN is necessary to conduct monetary transactions in India, invest in stocks, and pay
tax on their Indian income.
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NRI BANKING
The application for a PAN must be accompanied by:
A recent colored photograph of size 3.5 comes x 2.5 comes on the application form.
A

proof

of

residence

certificate/degree/credit

and

identity

(attested

card/voter

school

leaving/matriculation

identity/ration/passport/driving

license/telephone/electricity bill/employer certificate.

Code of the concerned Assessing Officer of the IT Department obtainable from the IT office
where form is submitted.
DEMAT ACCOUNT:A demit account facilitates buying and selling shares, precluding cumbersome paperwork and
meaningless delays.
Advantages of a Demat Account It is a safe, secure and convenient mode of transacting in shares.
Minimizes brokerage charges
Ensures immediate liquidity
Removes uncertainty on ownership title of securities
Allows quick allotment of public issues
Enables smooth process in pledging shares
Avoids delays due to wrong/incorrect signatures, post, and misplacement of certificates
Prevents risks like forgery and counterfeit, theft or damage to documents
Saves on stamp duty, paperwork on transfer deeds
Gives immediate benefits from bonus shares and stock splits
Who offers Demat Facility?
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NRI BANKING
Depository Participants or DPs offer demat account services, which would include banks.
Holding a demat account with a bank enables quick on-line dealings, ensuring credit of a
transaction to the account holders savings account by the third day. Banks have an added
advantage over other DPs with their large network of branches.
How to Open a Demat Account in India
Fill up the demat account opening form at the nearest Depository Participant
You may refer to either
CDSLathttp://www.cdslindia.com/demat_acct/open_demat.jsp or
NSDLathttps://nsdl.co.in/for the list of DPs in India.
Joint demat accounts can be opened, retaining the same order of names
Separate demat accounts have to be opened for different combinations of names in the case of
three or more joint holders.
Any number of demat accounts and DPs are permitted
A multiple-sign demat is feasible, operated by several holders
DPs charge a fee for switching shares from electronic to physical form and vice-versa, which
varies from a flat fee to a variable fee. Remit and demat charges may also show a discrepancy
between DPs.
Some DPs offer a discount to frequent traders.
It is advisable to maintain all demat accounts with the same DP to keep track of capital gains
liabilities. Different DPs follow dissimilar methods of computing the capital gains, which is
determined by the period of holding.
The charges on a demat account vary between DPs. Broadly, they are: account opening fee, an
annual folio maintenance charge paid in advance, a monthly custodian fee, and a charge on
transactions, which may either be charged every month or as a flat fee per transaction, and its
nature. Some DPs may skip the account opening fee but charge a re-opening fee for the
42

NRI BANKING
account. Account holders are also subject to a service tax.
No opening balance is required for a demit account.
Supporting documents to open a demat account
Passport-size photograph
Proof of identity, address and date of birth
DP-client agreement on non-judicial stamp paper
PAN Card
The applicant receives an account number and a DP ID number which are required for all
future communication with the DP.
NRI Demat Accounts
NRIs need to fill in NRI in the type and repatriable or non-repatriable in the sub-type on the
form. No special permission from the RBI is required by NRIs to open a demat account, though
specific cases may require authorization from the designated authorised dealers.
NRIs require separate demat accounts for securities under the foreign direct investment (FDI)
scheme, which is repatriable; and the Portfolio Investment Scheme and Scheme for Investment
which can be either repatriable or non-repatriable. Repatriable and non-repatriable securities
cannot be held in a single Demit account.
Resident Indians can continue to hold non-repatriable demat accounts they hold even after they
acquire non-resident Indian status. However, when a NRI returns to India permanently, he must
inform his designated authorised dealer of his new status, and a fresh account would have to be
opened. The securities held in the NRI Demat account would have to be transferred to the new
resident demat account, and the NRI Demat account closed. The Demat account would have to
be linked with the NRIs NRO account for non-repatriable accounts and NRE accounts for
repatriable accounts to credit dividends and interest.

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NRI BANKING

CASE STUDY ON NRI BANKING

Increasingly at Personal we are meeting Indians living abroad who are relocating to India.
Usually such individuals have a significant portion of their assets in the foreign country;
investments in India are usually linked to inheritance or savings made before shifting abroad
The task we are entrusted with is to help such individuals plan their finances. Here's how we
assisted one such family.
We recently met a Person of Indian Origin (PIO) who was based in the United States (US); he
has now shifted permanently to India. Let's call this individual Rajeev.
Almost all of Rajeevs savings are in the US; in US mutual funds and bonds. He has no exposure
to India in his asset allocation, although he does expect to inherit some Indian assets over time.
More about Rajeev He is 44 years of age and was settled in US for many years before relocating to India
He is married and has a 8-yr old daughter
Although he is not sure, there is a likelihood that his daughter might want to go back to US
for further studies
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NRI BANKING
Rajeev's investment details are as follows:
His combined investment in stocks and funds in the US accounts for 50% of his net assets.
Remaining 50% of his investments are in short-term deposits, again in the US. Important to note
that he does not own any residential property, either in the US or in India.
As mentioned earlier, since the client is now settled in India, and is certain to be here for the rest
of his life, in our view, it makes sense to shift his assets back to India. Why do we say that? Well,
if you know you are going to be in India, and all your future incomes and expenses are going to
be in Indian Rupees, why take on the risk of being invested in US Dollars? In case the US Dollar
were to depreciate vis-a-vis the Rupee, the value of your US assets would effectively erode. This
is not to say that no one should have money invested in other currency assets. From our
perspective, one should evaluate such investment opportunities only when one has completed
their investment plans for domestic assets. Importantly, you should have that much money in
another currency asset that is required to meet future needs (that need to be provided for in the
other currency).
In order to reallocate his assets, Sanjeev will need to liquidate his assets in the US and transfer
the proceeds to India. Since his daughter might go back to US for higher education in future he
will require money (US Dollars) at that point of time. Therefore, in his case, the liquidation and
then allocation of assets must be based on his needs in India as well as in the US.
Keeping this in mind we proposed to conduct his entire financial planning exercise in two
phases. The first phase involved understanding of his needs in India and the US and accordingly
liquidating his investments. The second phase involved, investing the proceeds in India.
Liquidation process:
We first started with liquidation of his investments in US, and for this, demarcating his needs in
India and US became the starting point for us. Since the client has no prior investments in India,
it gave us a good opportunity to define a well-diversified portfolio for him.
The next step was to decide the quantum of investment to be liquidated based on his needs. In
US, he has to continue with some of his investments for his daughter's future education. We
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found that around 10% of the client's total wealth will be sufficient for this purpose and rest he
can liquidate. Thus, we advised him to liquidate 90% of his total investments in US.
The next step was to transfer the proceeds to India. Normally, people who have foreign currency
(in this case US Dollar) get apprehensive about the exchange rate at which their proceeds are to
be transferred. In this particular case, since the client is already settled in India, we advised him
not to pay much heed to the exchange rate and instead start transferring the funds.

Asset allocation based on the client's needs in India:

Given that the client has no investment in property (he was living in a rented premise), the top
priority was to invest in a property. About 40% of his assets were allocated for the purpose.
Given the hype about property, Sanjeev was keen to consider a higher exposure; however we
recommended otherwise. In our view, and this holds true for most individuals, the number of
properties you own should be linked to your 'real' needs i.e. property which you need to give as
inheritance or property for self-use.
The fact that the client is financially very sound and in a position to take some risk, we
recommended that he invest upto 35% of the surplus in well-managed diversified equity funds in
a disciplined manner based on his needs and objectives. The portfolio consisted of no more than
six schemes.
Equities as an asset class are best equipped to generate high returns over longer time frames (3-5
years). Thus, his investment in equities should be well equipped to cater his future needs such as
his daughter's marriage, his retirement planning or any other need as and when required.
Another 10% of the surplus cash inflows could be invested in debt funds (short-term debt funds,
as at present interest rates are on the rise). Inclusion of debt funds in the portfolio will ensure that
the portfolio becomes well diversified across asset classes.
The balance (5%) could be maintained in liquid assets for any immediate requirement or for
contingency. Rajeev was also advised to take up a term insurance policy for himself. This is a
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pure risk cover plan that enables the individual to opt for a high insurance cover at relatively
lower premiums.
First and foremost, it needs to be executed (investing in mutual funds, buying property) and then
the plan needs to be monitored regularly. This is necessary as over time, Rajeev's risk profile will
change, as he gets older, he may not be comfortable with a higher allocation to equity, so a
portion of his money will have to be shifted to lower risk assets. Also the performance of the
mutual fund schemes will have to be monitored. Given the nature of the task, it is best for Rajeev
that he engages the services of a professional and competent financial planner

CHAPTER 9-CONCLUSION
NRI Banking today stands as one of the most profitable business for banks. With India having
one of the largest NRI populations and a very prosperous one too, NRI banking is one hot
business no bank can afford to ignore today. India needs foreign exchange reserves for its
developing economy. Realizing this, banks are shaping up their strategies in order to attract this
NRI money. Further with India pushing for Capital Account Convertibility, and the success of
Pravasi Bharatiya Diwas, prospects for NRI banking has never been so good than today.
Deposits can be broken before the maturity period but the interest payable would be the
applicable interest rate prevailing for that period at the time of opening the deposit. The
minimum period for NRE and FCNR would be 1 year. A penalty charge as applicable will be
levied.
Yes. The mandate facility is available for NRI customers. The mandate form duly completed
(with Form 60 or PAN card, proof of identity, proof of address, and photo) may be handed
over to the branch when the account is opened to authorize a person in India to operate the
account. This is possible only in the case of savings accounts.
Yes. However, you may consider doing so only on maturity of the deposit so that there is no
loss of interest.
Deposits are value dated. The date will be the date on which the funds are received by
Barclays (India) in its Nostrum accounts.
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A NRI can remit up to USD 1 million (or equivalent) per calendar year for any bonfire
purpose subject to payment of tax and furnishing the required documents.
The International ATM-cum-Debit card offers Rest 50,000 of cash withdrawal per day and
transactions worth Rest 50,000 at merchant establishments.
There are no withdrawal charges for cash withdrawn from any VISA ATM network across the world.
For purchases and ATM transaction(s) outside India there is a 2.5% currency conversion charge, at
all VISA enabled POS and ATM machines. Service Tax (currently 12.36%) on these charges will be
levied. For details of charges on Domestic debit cards, kindly refer the schedule of charges for
Consumer banking.

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