NRI BANKING

NRI BANKING
PROJECT REPORT ON

BANKING SERVICES

PROVIDED TO NRI

BACHELOR OF COMMERCE

SEMESTER V

SUBMITTED BY:

PENMETSA MEGHANA

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EXECUTIVE SUMMARY :-

NRI Banking is becoming popular among the Non-resident customers. As

India is showing progress more & more NRI investing in the country.
Banks should try to give their top class service to the NRIs as they are
looking for convenience, speed, high yield on investments with manageable
risk, reasonable cost & quality services.

Bank should lower the minimum balance requirement which is Rs.50,000

for NRIs as compared to resident who have to keep Rs.1000. The
documentation procedure in case of opening of a/c in banks, investing in any
property, for buying shares & debt, should be reduced and in case of loan at
a faster speed.

The services of banks should be fast, accurate & up to the standard as they
have to face competition not only from the local banks but also from the
banks based overseas.

Banks should also extend their services by providing ATMs abroad, E

-banking with efficient facility & balance inquiry message through
mobilizes.

Investment of NRI would help to bring more inflow of foreign exchange

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through taxes & investment policy & this would help Indian government to
repay its debt to the World Bank. Indian government should give their best
services & efforts to encourage NRI to invest in India. This would help our
economy to flourish & grow in future.

RESEARCH METHODOLOGY

In order to conduct the research an appropriate methodology became

necessary. In this
direction both primary as well as secondary data were attempted to be
collected. The methodology for collecting data with reference to
the secondary data was taken from the different published articles, books,
journals, and the relevant websites. The library of the college was of great
help. The questionnaire was initially prepared in tough sketch at the first
instance. These questions were discussed with our internal guides and our
teaching faculty. They have provided valuable suggestions, additions
deletions and modification of the rough questionnaire Methodology became
a preplanned strategy in collecting, editing, tabulating and in interpreting the
required information for the research. Thus methodology relied on both
primary and secondary data with the help of questionnaires, discussions,
observations as well as published work and unpublished work

OBJECTIVE OF THE STUDY

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To get an overview of NRI BANKING SERVICES
To analyze the growth of NRI banking services
To study the innovative concepts emerging in the banking industry for
NRIs
To observe the facility provided to NRI by Indian banks
To analyze the response of the NRI given to the computerization & new
invention in an Indian banks.

SCOPE OF STUDY:-

The scope of the study is to extend the knowledge about the NRI banking
services provided by banks but restricted to only ICICI Bank.

AREA :- In the vicinity of Mumbai (India) services for NRI by banks

BRANCH: - ICICI (Industrial Credit and Investment Corporation of
India) bank Andheri branch.

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INDEX

CHAPTER TOPIC NAME PAGE NO

NO
01 INTRODUCTION ON NRI BANKING 6
02 DEFINATION 18

03 DEPOSITORYS SCHME FOR NRIS 23

04 SERVICES OFFERED BY VARIOUS BANK 34

TO NRIS

05 RBI ISSUES GUIDELINES FOR MONEY 38

TRANSFER SCHEME

06 NRI INVESTMENTS 41

07 NRI INVESTMENT IN IMMOVABLE 44

PROPERTY IN INDIA

08 PAN CARD FOR NRIs 47

09 CASE STUDY ON NRI 52
10 CONCLUSION 56
11 ANNEXURE 57
12 FINDING & SUGGETION 58

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CHAPTER 1.

INTRODUCTION

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.
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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 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
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 NRI BANKING
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 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.

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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 to capacity as nominees. The various facilities granted to
NRIs are also available with certain exceptions to OCBs so 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.

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 Office /
RBI.
Maintains Bank, Branch and 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
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issuing, passing and stop payment of cheques. Supports Account Closure,
Preclosure, Renewal & overdue renewal of Deposits. Aid say Begin, Day
End & Month End 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.

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 - non resident 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 non-residents 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
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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.

Repatriable 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.

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.

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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 immovable properties held by
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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-Repatriable 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-
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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.

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)

Procedures & Benefits:

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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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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:

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NRO Term Deposit Account Half yearly

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

Resident Indians Non-Resident Indians

NRO Yes Yes

NRE No Yes

FCNR No Yes

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CHAPTER 2.

DEFINITION

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.

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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

(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

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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

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

Person of Indian Origin:

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

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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, 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
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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.

2(xi) " Overseas Corporate Body (OCB)" means a company, partnership

firm, society and other corporate body owned directly or indirectly to the
extent of at least sixty per cent by Non-Resident Indians and includes
overseas trust in which not less than sixty per cent beneficial interest is held
by Nonresident Indians directly or indirectly but irrevocably.

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Conclusion:

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

DEPOSITORYS
SCHEM

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:

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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, 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.

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Loans against Security of Funds held in the Accou

To the account holder

i) For personal purposes or for carrying on business activities (except

agricultural/plantation activities/investment in real estate business).
ii) For making direct investment in India on non-repatriation basis.
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 Rs. 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
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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 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:-

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 NRI BANKING
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.
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
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 NRI BANKING
RBI guidelines prevail on these terms, issued as and when required.

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.
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 NRI BANKING
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 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

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 NRI BANKING
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:

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
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 NRI BANKING
(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 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.

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 NRI BANKING
(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.

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.
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 NRI BANKING
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, Government of India

TAX BENEFITS for NRIs

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

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.

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 NRI BANKING

CHAPTER 4

SERVICES OFFERED BY
VARIOUS BANK TO
NRIS

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.
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 NRI BANKING
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.

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).

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 NRI BANKING
Minimum Deposit :- USD 25,000 or equivalent.

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 a 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:

Foreign Currency Non-Resident (Non-Resident

(Non-Resident) (External) Rupee Ordinary Rupee
Particulars Account (Banks) Account Account
Scheme(FCNR(B) Scheme(NRE Scheme(NRO
Account) Account) Account)
Who can open an NRIs/PIOs NRIs/PIOs Any person resident
account outside India (other
than a person
resident in Nepal
and Bhutan)
Joint account In the names of two In the names of May be held jointly
or two or more NRIs with residents
NRIs

Nomination Permitted Permitted Permitted

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 NRI BANKING
Currency in which Pound Sterling, US Indian Rupees Indian Rupees
account Dollar, Jap. Yen or
is denominated Euro. Australian
Dollar, Canadian
Dollar
Repatriability Repatriable Repatriable Non-repatriable*

Type of Account Term Deposit only Savings, Current, Savings, Current,

Recurring, Fixed Recurring, Fixed
Deposit Deposit
Rate of Interest Subject to cap: Rate of interest on Rate of interest on
LIBOR minus 25 domestic savings domestic savings
basis points except account will also account will also be
in case of Japanese be applicable to applicable to NRO
Yen where the cap NRE savings savings account. For
would be based on account. For Fixed Fixed Deposits, the
at the prevailing Deposits, the rates rates can be fixed by
LIBOR rates can be fixed by banks subject to
banks subject to ceilings prescribed
ceilings prescribed by RBI
by RBI

Tax Aspects Interest income tax Interest income tax Interest income
free and no tax free and no tax taxable and liable
deduction at source. deduction at for TDS @30% plus
source. applicable surcharge
subject to
conditions. DTAA
benefit may be
available subject to
fulfillment of
conditions.

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 NRI BANKING

CHAPTER 5

RBI issues guidelines for

money transfer scheme

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
38
 NRI BANKING
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 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.

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 NRI BANKING
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 Rs 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 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. We help people and business by providing
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 NRI BANKING
affordable, reliable and convenient payment services.

ICICI Bank NRI Money Transfer:-

ICICI Bank, the leading bank in India offering financial services to the NRI
community through NRI saving account, NRE Accounts, Fixed Deposit,
FCNR deposits, and the quickest way to send money online to India.

CHAPTER 6

NRI
INVESTMENTS

NRI INVESTMENT:

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.
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 NRI BANKING
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.

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.

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 NRI BANKING
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 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

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 NRI BANKING

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

1 establishing a Representative Office by Overseas Company for Liaison
Activities to open a Project/Site Office in India.

IPI Company/Individual (declaration) acquiring property

CHAPTER 7

NRI Investment In
Immovable Property In
India

NRI INVESTMENT IN IMMOVABLE PROPRETY 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:

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 NRI BANKING
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

A person resident outside India (an NRI) who is Indian citizen or foreign
citizen of Indian origin.

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.
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 NRI BANKING
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:-

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.

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 NRI BANKING
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.]

CHAPTER 8

PAN Card for NRIs

PAN CARD FOR NRIS:

For all Indian citizens who are liable to pay tax under the Income Tax Act,
47
 NRI BANKING
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.

The application for a PAN must be accompanied by:

A recent colored photograph of size 3.5 cms x 2.5 cms on the application
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 NRI BANKING
form.
A proof of residence and identity (attested school leaving/matriculation
certificate/degree/credit card/voter 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 demat 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
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 NRI BANKING
Saves on stamp duty, paperwork on transfer deeds
Gives immediate benefits from bonus shares and stock splits

Who offers Demat Facility?

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. Remat 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:

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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 account. Account holders are also subject to a service tax.
No opening balance is required for a demat 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 Demat 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-
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repatriable accounts and NRE accounts for repatriable accounts to credit
dividends and interest.

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

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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 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 Sandeep:

He is 34 years of age and was settled in US for many years before

relocating to India.
He is married and has a 9-yr old son.
Although he is not sure, there is a likelihood that his son might want
to go back to US for further studies.

Sandeeps 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 was to depreciate viz-a-viz 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).
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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 son's future education. We 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.
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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 son'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. Sandeep was also advised to take up a term
insurance policy for himself. This is a pure risk cover plan that enables the
individual to opt for a high insurance cover at relatively lower premiums.

It goes without saying that our recommendation to Sandeep (although very

critical) was just a starting point. 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, Sandeep'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 Sandeep that
he engages the services of a professional and competent financial planner
who can actively monitor his financial plan.

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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.

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PRIMARY DATA QUESTIONARIES :-

VISITED ICICI BANK ANDGERI BRANCH

MET MR. KALPESH DHANJI MOTA

ANNEXURE:-

Can I break my deposit before the maturity period?

If I am visiting India, can I use travelers cheques or currency to open an
account or credit my existing NRE Account?
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Can any person in India be authorised to operate the NRI's account?

Can an FCNR deposit in one currency be converted to a deposit in another

currency

Can FCNR/NRE deposits be value dated?

How much money can an NRI remit abroad annually from his NRO
accounts?

Can an NRI repatriate sale proceeds of his property purchased by him by

remittance from abroad?

What is the frequency of interest payment in an NRE savings account?

What is the limit on the international ATM-cum-Debit card for NRI

customers?

What are the charges applicable for debit card?

Can I repatriate money out of balances held in my NRO accounts?

FINDINGS & SUGGESTIONS

Yes.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.
Travelers cheques can be used to credit/open the account. If you are
bringing foreign currency notes & travellers cheques, you will have to
submit a Currency Declaration Form (CDF) to the Customs authorities on
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arrival in India if the foreign currency notes exceed USD 5,000 or
travellers cheques and notes exceed USD 10,000. You must produce the
CDF for endorsement by the bank when you submit the money for
opening/credit to an account.

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 authorise 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 Nostro accounts.

A NRI can remit up to USD 1 million (or equivalent) per calendar year for
any bonafide purpose subject to payment of tax and furnishing the
required documents.

Yes. However the amount repatriated should not exceed the amount

paid for acquisition i.e.

Amount received in foreign exchange through normal banking channel

The foreign currency equivalent as on date of payment of amount paid by
debit to NRI a/c
The frequency of interest payment would be half yearly.

The International ATM-cum-Debit card offers Rs 50,000 of cash

withdrawal per day and transactions worth Rs 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
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the schedule of charges for Consumer banking.

Interest earnings can be repatriated. In addition to this, remittance/s up to

USD 1 million per calendar year from balances in NRO accounts subject
to payment of applicable taxes is allowed.

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