Bank accounts by NRIs in India - Fee Only Investment Advisers

Regulations relating to maintenance of bank accounts by Non Resident Indians (‘NRIs’) are governed by the Foreign Exchange Management Act, 1999 (‘FEMA’).

An NRI is an individual resident outside India (as per FEMA) who is a Citizen of India. A Person of Indian Origin (‘PIO’) is an individual who is a citizen of any other country but whose spouse is or parents / grand parents / great grand parents is/were citizen(s) of India. PIO also includes a person who was a citizen of India by virtue of India or the Citizenship Act, 1955 or who belonged to a territory which became part of India after the 15^th August 1947. PIO also includes an Overseas Citizen of India (‘OCI’) cardholder.

Types of accounts that an NRI / PIO can maintain:

There are three types of accounts:

Non Resident (Ordinary) Rupee Account (‘NRO Account’):
Non-Resident (External) Account (‘NRE Account’):
Foreign Currency (Non-resident) Account (Banks) Scheme – FCNR (B) Account

Non Resident (Ordinary) Rupee Account (‘NRO Account’):

NRO account is a rupee designated account. Indians going abroad for good are required to designate their existing bank accounts into NRO accounts.

Funds lying in NRO account cannot be freely repatriated outside India except under the USD 1 million Scheme.

Non-Resident (External) Account (‘NRE Account’):

Only NRIs and PIOs are eligible to open an NRE account in India. NRE account also is a designated rupee account. It can be opened by NRIs staying abroad. The main advantage of NRE account is that funds in this account can be repatriated to the foreign country freely without any limit. Interest arising on funds lying in this account is exempt from income tax in India.

Foreign Currency (Non-resident) Account (Banks) Scheme – FCNR (B) Account

FCNR account can only be a foreign currency denominated fixed deposit with maturity of more than one year. It can be continued till maturity even if the holder has turned into a resident in India under FEMA. The balance in this account can be shifted to Resident Foreign Currency Account on maturity if the holder has become resident in India under FEMA. This account is very useful where the NRI (FEMA) does not want to take currency risk.

For better clarity of readers, a comparative chart of these three accounts is given below:

(source : FAQs issued by RBI)

Particulars	Non-Resident (External) Rupee Account Scheme [NRE Account]		Foreign Currency (Non-Resident) Account (Banks) Scheme [FCNR (B) Account]	Non-Resident Ordinary Rupee Account Scheme [NRO Account]
Who can open an account	NRIs and *PIOs Individual/entities of Pakistan and Bangladesh prior approval of the RBI required			Any person resident outside India. Individual/entities of Pakistan and Bangladesh prior approval of the RBI required
Joint account	Can 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 life time of the NRI/ PIO account holder.			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		Any permitted currency i.e. a foreign currency which is freely convertible	Indian Rupees
Type of Account	Savings, Current, Recurring, Fixed Deposit		Term Deposit only	Savings, Current, Recurring, Fixed Deposit
Period for fixed deposits	From 1 to 3 years. However, banks are allowed to accept NRE deposits above three years from their Asset-Liability point of view		1 year to 5 years	As applicable to resident accounts.
Permissible Credits	Credits permitted to this account are: inward remittance from outside India, interest accruing on the account, transfer from other NRE/ FCNR(B) accounts, interest or any current income like rent, dividend etc. on investment and maturity proceeds of investments (if such investments were made from this account or through inward remittance).			Credits permitted to this account are: Inward remittances from outside India, legitimate dues in India and transfers from other NRO accounts 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 disbursements, remittance outside India, transfer to other NRE/ FCNR(B) accounts and investments in India.			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 and subject to conditions under FEMA. Funds can be transferred to NRE account within this USD 1 Million facility.
Repatriability	Repatriable			Not repatriable except for all current income. Balances in an NRO account of NRIs/ PIOs are remittable up to USD 1 (one) million as explained earlier.
Taxability	Interest on balance in this account is exempt from tax			Interest on balance in this account is taxable
Operations by Power of Attorney in favour of a resident	Power of attorney holder can only withdraw for permissible local payments or remittance to the account holder himself through normal banking channels.			Power of attorney holder can only withdraw for: permissible local payments or remittance of current income to the account holder outside India remittance to the account holder himself through normal banking channels. While making remittances, the limits and conditions of repatriability will apply.
Change in residential status from Non-resident to resident	Inform the bank about change in residential status and designate the account as resident account Or the funds held in these accounts may be transferred to the RFC accounts, at the option of the account holder.	On 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. Thereafter, it can be converted into resident rupee deposit accounts or RFC account (if the depositor is eligible to open RFC account), at the option of the account holder.		To be designated as resident accounts on becoming resident in India. Likewise, when a resident Indian becomes a person resident outside India, his existing resident account should be designated as NRO account

Special Non-Resident Rupee Account – SNRR account:

Apart from this, any person resident outside India, having a business interest in India, may open a SNRR account with an authorised dealer for the purpose of putting through bona fide business transactions in rupees.

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