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- Residing (External ) Account (NRE Account) qualify for certain benefits like
exemptions from taxes in India, free repatriation facilities, etc. NRI banking facilities
are available to NRI and PIOs.

WHO IS A NON-RESIDENT INDIAN (NRI)?

A Non-Residing Indian (NRI) as per FEMA 1999 is an Indian citizen or Foreign National
of Indian Origin resident outside India for purpose of employment, carrying or business
or vacation in circumstances as would indicate an intention to stay in Indian 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 citizen of Bangladesh and Pakistan) residing outside India. Students studying
abroad are also treated as NRIs.

citizen who stays abroad for an indefinite period an 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 assignment are also treated as
Non-residents.

1
 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, expect for a few
specified countries, and would be eligible. The Card would issue to eligible applicants
through the concerned Indian Embassies / High Commissions/Consulates and for those
staying in Indian on a long term visa, the concerned foreigners Regional Registration
Officers (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 become part of India thereafter provided neither
was at any time a citizen of 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 a wide range of economic, financial, education a land
cultural benefits. The benefits envisaged under the scheme include:-

 No requirement of visa to visit India;

 No requirement to register with the foreigner’s registration Officer if
continuous stay does not exceed 180 days. If continuous stay exceed 180
days, then registration is required to be done within a period of 30 days of
the expiry of 180 days;

2
  Parity with Non-Resident Indians in respect of facilities available to the
latter in economic, financial, educational fields etc. These facilities will
include:
 Acquisition, holding, transfer and disposal of immovable properties in
India except of agricultural/plantation properties;
 Admission of children in educational instructions in India under the
general category quota for NRIs-including medical/engineering colleges,
IITs, IIMs etc.
 Various housing scheme of Life Insurance Corporation of India, State
Government and other Government and other Government agencies;
 All futures benefits that would be extended to NRIs would also be
available to the PIO card holders;
 However, they shall nor enjoy political in India.

What is an OCB?

Overseas Corporation Bodies (OCBs) are bodies predominantly owned by individual of

Indian nationality of 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 in 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:

 Maintenance of bank accounts in India.

 Investment in securities/shares of, and deposits with Indian firms/companies.
 Investments in immovable properties in India.

3
 KEY BENEFITS
NRI-Banking follows a modular structure. The various module render our NRI
BANKING solution offering (which are started below) in a seamlessly integrated
fashion.

The Masters module permits maximum parameterization to be done, enabling the

end user to make all changes as per directives from Head Office/RBI. Maintains
Bank, Branch and holiday 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 issuing, passing and stop
payment of cheques. Support Account closure, Pre closure, Renewal of Deposits.
Aids Day Begin. Day End & Month End Processing Processes Quarterly, and
transfer to Inoperative & Half Yearly – SB Interest Calculation. Hastens Deposit
Receipt Printing, Charging 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 ‘licenses 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 person 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 – nonresidential (external) rupee account.

 FCNR-B A/c – foreign currency nonresidential account.
 NRO A/c – non-resident ordinary account.

4
  RFC A/c – resident foreign currency account.

All NRIs can open such accounts, with the exception of individuals residing in Pakistan
and Bangladesh, who requires 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 exceed the LIBOR/SWAP rates. In the
cases 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.

Repatriable Accounts

Funds that can be transferred or repatriable abroad are maintained in a Non Residential
External Bank account. Generally, funds remitted from outside India are credited to this
account. Investments made from foreign funds can be repatriable 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 rare on NRE account 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 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 rates also applies to NRE deposits renewed after their
present maturity period.

5
 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 to 5 years

NRO

Account
 Only current earnings are repatriable.
 Savings NRO accounts are normally operated to credited rupee income from
shares, interest, rent from properly in India, etc.
 In case of term deposits, banks are allowed to determine their own interest rates.

Banks can allow remittances 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 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 restriction as to their utilization or in investment in any form outside
India.

6
 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 repatriable 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
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 Indian 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 citizen can remit, through the
Authorized Dealer, up to US done million per calendar year from the NRO
account or from income from sale of assets in India.

7
 OPENING OF NRI ACCOUNT

HOW TO OPENING ACCOUNTS WITH A BRANCH IN INDIA

To open an NRE account please complete the account opening from and mail it to the
branch of your choice along with;

 Passport copy
 Visa/residence permit
 2 photographs
 Initial money remittances

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 Savings Bank a/c Current Accounts

 Fixed Deposits in Indian Rupees
 Fixed Deposits in Foreign Currency
 NRO accounts (Rupee accounts for crediting in India)

You can authorized a resident to operate your account through a power of attorney of
Letter or Authority

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

Procedure & Benefits:

 Non-resident account can be opened

 Non-Resident accounts can be opened along with your remittances through
banking channel.

8
  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 deposits return to India, the NRE accounts will be automatically
treated as Resident account. However NRE term deposits 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 nonresident or
resident.
 Loans against deposits are allowed for purpose other than investment up to 90%
of the deposit.
 The income from deposits is free from Indian Income Tax.
 It is also free from Gift tax for one time gifting.

Document 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 Hong Kong ID card for
residence of Hong Kong) 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.

9
 For person employed with foreign shipping company

 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 document sent by mail

 All the relevant above mentioned document/ signature to be attested by anyone 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. Frequently of Interest payment on
accounts:

NRO – Term Deposit Account – Half yearly

NRE – Savings Account – Quarterly

NRE – Term Deposit Account – Half yearly

FCNR – Term Deposit Account – Quarterly

10
 Opening of JOINT ACCOUNTS:-

Type of account Joint account with Joint account with

Resident Indians Non- Resident Indians
NRE Yes Yes
NRO No Yes
FCNR No Yes

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
definition – one coined under the Foreign Exchange Management Act, 1999 – (FEMA)
and the other as per the Income Tax Act, 1961.

FEMA definition:

11
The most relevant definition concerning an NRI’s various bank account and investment in
movable and immovable properties in India is the one provided by Foreign Exchange
Management Act, 1973 – (FEMA), Which 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 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 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 registration or incorporate 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 India
(d) 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”.

12
  Recently RBI has clarified that students studying abroad also be treated as NRI
sunder FEMA and accordingly be eligible for foreign investments and
NRE/FCNR a/c’s.
 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 definition together, it can be summarized that both:
 An Indian Citizen of Indian origin residing outside India are defined as Non-
Resident Indians.

Person of Indian Origin:

 F.E.M.(Deposit) Regulation define a Person of India 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
citizen, or
 a spouse of an Indian citizen, or
 A spouse of a person covered under (i) or (ii) above.
 He at any time held Indian passport; or
 He or either of his parents or any of his grant-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 are :
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 regard 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.

13
 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) 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 Indian
by virtue of the Constituents of Indian or the Citizen Act, 1955 (57 of
1955);

Condition of number of days 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 vocation 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

14
 India will continue to be an NRI during his visit to Indian 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 Non Resident Indians directly or indirectly but irrevocably.

Conclusion:

At the cost of repetition, it is once 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

15
 Non –Resident (External) Account – NRE Account

Eligibility:-

Non Resident Indians (NRIs) and Person of Indian Origin (PIOs) can open and maintain
NRE account 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:

Payment 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
repatriable nature.

Permitted Credits

16
 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 India 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 From (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 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 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

 For personal purpose or for carrying on business activities (except agricultural/

plantation activities/investment in real estate business).
 For making direct investment in India on non- repatriation basis.

17
  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-leading.

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.

Changes 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 Account – 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

18
 delete his name or allow the account at 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 travelers cheques to the NRE account.
 In case where the account holder or a bank designated by the him has been
granted permission by Reserve Bank to make investment 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 IPOs are eligible to maintain an FCNR account with an authorized bank
in India.
 Accounts may be opened with funds remitted from outside, existing NRE/FCNR
account, 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
man 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.
19
 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 periodically 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 rupee and vice versa,
the day’s 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.

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 holder’s resident status changes
to resident Indian.

20
 However, except for interest rates and reserve requirements of FCNR deposits,
these accounts are treated as residents accounts effective from the account
holder’s date of return to India.
 On maturity, these accounts are converted to either an RFC account or the
Resident Rupee Deposit account.
 As per 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 authorized dealer or an authorized bank for transactions conducted in Indian
Rupees.
 Individuals or entities of Bangladeshi of 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 maintaining them.

Joint Account with Residents/Non-residents

21
 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.

Debit:-

 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 authorized dealer.

Remittance of Assets

NRIs and PIO may remit up to USD One million per calendar year, out of balances held
in the NRO account which could be acquire 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

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.

22
Other financial assets: there is no lock-in period for remittance of sale proceeds of other
financial assets.

Assets acquired by way of inheritances:

Sale Proceeds of assets acquired through inheritances can be remitted. No lock-in period
applies here if the authorized 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 up to 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 authorized 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 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 it.

23
 Grant of Loans/overdrafts by authorized 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 consideration which apply to loans to trade and industry will
apply to loans and facilities granted to third parties. The authorized
dealers/bank may allow an overdraft to the account holder subject to his
commercial discretion and compliance with the interest rate directives.

Changes 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 account 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 treat as non-
resident during the visit.

24
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 treat 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 authorized dealer mat at its discretion
allow the loan facility to continue. In case, Payment of interest and repayment of Loan
may be made by inward remittance or out of bonafide resource in India.

Payment funds to Non-resident/Resident nominee

The amount payable to a non-resident from 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 transaction can be made by inward remittance or
out of balances held in the cardholder’s FCNR/NRE/NRO Accounts.

25
 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.

 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

26
 SERVICES OFFERED BY VARIOUS BANK TO NRI’S

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.
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
 Funds 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. Theses specialized service and banking
accounts have drawn enormous NRI funds to India.

SERVICE OFFERED BY ICICI BANK:-

27
Rupee plus plan: - At ICICI Bank, we believe in providing you with the most
competitive returns on yours 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 if 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.

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 is 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 Rupee at a given
rate (Forward Rate).

Rupee plus plan advantage: - onan average the returns are significantly higher
compared to putting your money in NRE FD per the prevailing marked 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.

The following banking facilities are available to NRIs, as per the current
RBI/FEMA guidelines.

Foreign Currency Non-Resident (Non-Resident

28
 (Non-Resident) (External) Rupee Ordinary Rupee
Particulars Account (Banks) AccountScheme(NRE Account
Scheme(FCNR(B) Account) Scheme(NRO
Account) Account)
Who can open an NRIs/PIOs NRIs/PIOs Any person
account resident outside
India (other than a
person resident in
Nepal and Bhutan )
Joint account In the name of two In the names of two May be held jointly
or or more NRIs with residents
NRIs
Nomination Permitted Permitted Permitted
Currency in which Pound Sterling, US Indian Rupees Indian Rupees
account is Dollar, Jap. Yen
denominated or Euro. Australian
Dollar, Canadian
Dollar
Repatriability Repariable 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 be account will also be
in case of Japanese applicable to NRE applicable to NRO
yen where the cap savings account For savings account.
would be based on fixed Deposits, the For Fixed Deposits,
at the prevailing rates can be fixed by the rates can be
LIBOR rates banks subject to fixed by banks
ceilings prescribed by subject to ceilings
RBI prescribed by RBI

29
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%
source plus applicable
surcharge subject to
conditions. DTAA
benefit may be
available subject to
fulfillment of
conditions.

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 rupee can be purchased from exchange companies of

30
one country and mailed to the branch of another country where the customer has the
account.

Telegraphic or wire transfer can be made through branch to branch. Cheques can be
deposited for credited for credit of the customer’s 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.

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.

UAE EXCHANGE

PROVIDING speed, convenience and security of transactions, the Xpress Money Service
of UAE Exchange company is providing 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, Fiji, Sri Lanka and Bangladesh, the UAE
Exchange Centre specializes in fund Transfer across the globe and enjoy 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

31
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 services is
currently available for inward remittances in India. “Credits to NRE/FCNR accounts are
not permitted to route through Money Transfer Service Scheme (MTSS)”

SENDWISE:-

A rupee demand draft delivered to the recipient’s 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 amount the world online to over 84,000 money gram agent location,
in more than 170 countries. Not only is sending money with money gram safe and
convenient, you’ll find the same day service to be one fastest way to send your money
online-usually arriving within minutes. Send money online or at a money gram agent
location near you. Money gram is a global leader in international money transfer and the
largest processor of money orders in the U.S. We help people and business by providing
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.

32
 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 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 the min India
companies. Some of the investment schemes presently available to Non-resident Indians
(NRIs) include the facility to invest up to 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.

33
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 NRI’S 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-payers can obtained a binding ruling from the Authority on issues
which could arise in the determination of this 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.

PARTFOLIO 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.

NRI’s 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.

34
 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 Ruling (AAR), Secretariat for Industrial
Assistance (SIA), Ministry of Commerce and Industry; and Office of the Chief
Commissioner (Investment & 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 scheme 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/Debenture By Non-Resident To Non-Residents

FNC 1 Permission To Establish A Branch Office On India By An Overseas

Company
Establishing A Representative Office By Overseas Company For
Liaison
Activities To Open Project/Site Office In India
IPI Company/Individual (Declaration) Acquiring Property

35
 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 agriculture land and plantation, with repatriation
of foreign exchange equivalent of cost of acquisition (maxi. Two incase of residential
house) 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

36
 Rules for Acquisition & Transfer by Foreign Citizen NRIs

Purchase / Acquisition:

There is a general permission to acquire any immovable property (other than agriculture
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

agriculture 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 Agriculture 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,

37
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. banker’s 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. (Video notification no
FEMA 65/2002 RB dated 29-06-02.)

 It may be noted that there are no restrictions as repatriation of sale proceeds

number of commercial or industrial properties.

38
 CHAPTER 8

PAN Card for NRIs

39
For all Indian citizen who are liable to pay tax under the Income Tax Act, 1961, or are
required to enter into financial transaction 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 allowed through e-mail on priority is 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 NRI’s, 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 accompanies by:

40
  A recent colored photograph of size 3.5 cms * 2.5 cms on the application form.
 A proof of resident 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 transaction in shares.

 Minimizes brokerage charges
 Ensures immediate liquidity
 Removes uncertainty on ownership titles of securities
 Allows quick allotment of public issues
 Enable 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?

Depository particulars or DPs offers 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 holder’s 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

 Joint demat accounts can be opened, retaining the same order of names

41
  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 or physical from vice-versa,
which various 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 follows 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 transaction, 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 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 “repatriation or non-repatriation” in the sub-
type on the form. No special permission from the RBI is required by NRIs to open a
demat account, through specific cases may require authorization from the designated
authorized dealers.

42
NRIs requires 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-repatriation 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 authorized 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 NRI’s NRO account
for non-repatriable accounts and NRE accounts for repatriable accounts to credit
dividends and interest.

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.

43
 Bibliography:-

Website

 www.Google.com
 www.icici.com
 www.google.com
 www.wikipedia.com

Books/Journal

 Nri Banking
 Articles in Newspapers

Libraries referred

 College library

44