JAIIB

50 Days – 50 Marks
QW

Day 14
 Non-Resident (External)
Rupee Account Scheme

Foreign Currency (Non-

Account in India for NRIs
resident) Account
and PIOS
(Banks)Scheme

Non-Resident (Ordinary)
Account Scheme
NRE Account
• NRIs and PIOs can open the account with ADs and other banks (including
cooperative banks)
• Individual/entities of Pakistan & Bangladesh shall require prior approval of RBI
• May be held jointly in the names of two or more NRIs/ PIOs.
• NRIs/ PIOs can hold jointly with a resident relative on ‘former or survivor’
basis. The resident relative can operate the account as a Power of Attorney
holder during the lifetime of the NRI/ PIO account holder.
• Type of Account- Savings, Current, Recurring, Fixed Deposit
• Currency- Indian Rupees
NRE Account
• Operations by Power of Attorney in favour of a resident- withdrawals for
permissible local payments or remittance to the account holder himself through
normal banking channels, make permissible investments in India.
• PoA holder is not allowed to
✓Open a NRE account
✓repatriate outside India funds in the account except to the NRI account holder
✓make payment as gift to a resident on behalf of the account holder
✓transfer funds to another NRE account
• Both inward & outward remittances are allowed
NRE Account
• Period for fixed deposits- From 1 to 3 years
• Permissible Credits
• Credits permitted to this account are inward remittance from outside India,
interest accruing on the account, interest on investment, transfer from other
NRE/ FCNR(B) accounts, maturity proceeds of investments (if such investments
were made from this account or through inward remittance).
• Current income like rent, dividend, pension, interest etc. will be construed as a
permissible credit to the NRE account.
• Permissible Debits- Local disbursements, remittance outside India, transfer to
other NRE/ FCNR(B) accounts and investments in India.
NRE Account
• Repatriable
• Income earned in the accounts is exempt from income tax and balances exempt from
wealth tax
• Loans in India- (Fund or Non-fund) AD can sanction loans in India to the account holder/
third parties without any limit, subject to usual margin requirements. These loans cannot
be repatriated outside India and can be used in India only for the purposes specified in the
regulations. (not SB account)
• Loan purpose-
• Personal purposes or for carrying on business activities.
• Investment (non-repatriation basis) as capital in Indian firms/companies as per FEMA.
• Acquiring flat/house in India for own residential as per FEMA.
• Cannot be used for relending or agricultural/plantation activities or investment
NRE Account
• Loan outside India - loan can be given to the non-
resident or to third parties for bonafide purpose
• No monetary limit
• Death of depositor- transferred to non-resident
nominee. Remittance outside India to meet liabilities of
deceased.
• Loan repayment – adjusting deposits, inward
remittances, balance in NRO account
Interest on NRE deposits
• RBI interest rate on deposits directions 2016
• Term deposits interest rates- vary only on account of the tenor
and for bulk deposits
• Ceiling-should not exceed that for comparable domestic rupee TDs
• Additional interest for staff and senior citizens is not permitted
• On deposit of returning NRI converted to RFC A/c- if TD less than 1
year- not more than SB
• On premature withdrawal - penalty as per board approved policy.
• Penalties for conversion of NRE to FCNR
• No penalty NRE to RFC
• No penalty on transfer of business to other bank
FCNR(B) Account
• Any permitted currency Term Deposit only- 1 to 5
years
• Floating & fixed interest rate
• Permissible debits & credits, loans, rate of interest,
PoA same as NRE a/c
• Repatriable
• Change in residential status, FCNR (B) deposits may
be allowed to continue till maturity at the contracted
rate of interest, if so desired by the account holder. –
treated as resident deposits from the date of return
• On maturity- RFC a/c
NRO Account
• A person resident outside India and a foreign national of non-
Indian origin visiting India.
• Opened with AD, authorized banks, Post Offices
• Joint Account- May be held jointly in the names of two or more
NRIs/ PIOs. May be held jointly with residents on ‘former or
survivor’ basis.
• Currency- Indian Rupees
• Savings, Current, Recurring, Fixed Deposit
• Period for fixed deposits- As applicable to resident accounts.
NRO Account
• Permissible Credits- Inward remittances from outside India, legitimate dues in India and
transfers from other NRO accounts are permissible credits to NRO account.
• Rupee gift/ loan made by a resident to a NRI/ PIO relative within the limits prescribed
under the Liberalised Remittance Scheme may be credited to the latter’s NRO account.
• Permissible Debits- Local payments, transfers to other NRO accounts or remittance of
current income abroad.
• Apart from these, balances in the NRO account cannot be repatriated abroad except by
NRIs and PIOs up to USD 1 million, subject to conditions specified in Foreign Exchange
Management (Remittance of Assets) Regulations, 2016.
• Funds can be transferred to NRE account within this USD 1 Million facility.
NRO Account
• Taxable
• Loans against the deposits can be granted in India to the account holder or third
party subject to usual norms and margin requirement
• Loans outside India- Not permitted
• Return of NRI to India – NRO account is designated as resident a/c if indication to
stay in India for an uncertain period
• Residents becomes NRI – Designated as NRO account
Issue of International Credit Cards
• ADs can issue ICCs to NRIs/PIOs and the transactions
may be settled by inward remittance or from the
cardholder’s FCNR(B)/NRE/NRO accounts
Accounts In India of Foreign
Nationals Visiting India
• NRO current or savings account can be opened for
foreign nationals of non-Indian origin visiting India with
funds remitted from outside India through banking
channel or by sale of foreign exchange brought by him to
India.
• The balance in the NRO account may be paid to him
when leaving India if held for not exceeding 6 months
and no credit of any local funds except interest accrued
thereon.
Accounts of Foreign National Leaving India
• Permitted to be redesignated as NRO account for collecting pending bonafide
dues in India.
• Authorised category-1 banks to satisfy that the credits are bonafide dues when
he or she was a resident in India
• The funds credited to be repatriated abroad immediately on payment of
applicable income tax and other taxes in India
• The amount repatriated abroad should not exceed $1,000,000 per financial year
• The debit to the account only for repatriation to the account holders account
maintained abroad
• The account to be closed soon after all the dues have been received and
repatriated as per the declaration made by the account holder
SNRR Account
• Foreign nationals or entities with business relationships with individuals/entities in
India.
• Any person resident outside India, having a business interest in India for putting through
bona fide transactions in rupees.
• Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh
requires prior approval of Reserve Bank.
• Non-interest bearing
• Debits and credits specific/ incidental to the business proposed to be done by the
account holder
• Tenure- Concurrent to the tenure of the contract / period of operation / the business of
the account holder and in no case should exceed seven years, other than with approval
of the Reserve Bank.
Concept Check

Q1. Which of the following NRI bank accounts is maintained in foreign currency?
A) NRE Account
B) NRO Account
C) FCNR (B) Account
D) All of the above
Answer: Option C
Concept Check

Q2. Which type of NRI bank account allows the repatriation of both the principal and
interest without any limits?
A) NRE Account
B) NRO Account
C) FCNR (B) Account
D) Both A and C
E) Both B and C
Answer: Option D
Concept Check

Q3. Upon getting the NRI status, a resident savings account must be either closed or
converted only to an ______account.
A. NRE
B. NRO
C. FCNR
D. Any of the above
Answer: Option B
Concept Check

Q4. What is the maximum limit for repatriation of capital funds from an NRO account in
a Financial Year?
A) USD 500,000
B) USD 750,000
C) USD 1 million
D) USD 2 million
E) No limit
Answer: Option C
Concept Check

Q5. Which of the following statements is true regarding the taxability of interest earned
in NRI accounts?
A) Interest earned in an NRE account is taxable in India.
B) Interest earned in an NRO account is tax-free in India.
C) Interest earned in an FCNR (B) account is tax-free in India.
D) Interest earned in both NRE and NRO accounts is tax-free in India.

Answer: Option C