Finance Articles Sub Categories

Banking Services For NRIs In India

By: John Parker

Almost all the Indian Banks provide services to the NRIs. There are
different types of accounts for them. They are:

* Non-Resident (Ordinary) Account - NRO A/c
* Non-Resident (External) Rupee Account - NRE A/c
* Non-Resident (Foreign Currency) Account - FCNR A/c

An Indian resident who is earning forign exchange can also maintain Foreign
Currency account in the country with an authorised dealer bank but only to
the maximum limit of 50% of such foreign exchange earnings under the
Exchange Earners Foreign Currency Account (EEFC) Scheme.

Some of the FAQs given below will make it easy to understand the services
provided by banks to the NRIs.

FAQ for NRIs

1. What are the special features of each bank account?

The special features are as under:

NRO A/c.: The funds, credited to this account, cannot be repatriated
outside India in foreign exchange, without prior permission of the Reserve
Bank of India. Interest, earned is eligible for repatriation outside India,
net of Indian taxes. The remittance of interest (net of taxes) will be
permitted by the authorised dealer who maintains the account, if the account
holder makes an application to the authorised dealer, in the prescribed
form. No RBI permission is required for remittance of interest.

NRE A/c.: The funds, standing to the credit of this account, as well
as interest earned thereon, are remittable outside India in free foreign
exchange, without permission of the RBI. The interest income is not subject
to Indian Income-tax. Credits to the accounts should be in the form of
remittance in foreign exchange from outside India, as well as other funds,
which are eligible to be remitted outside India, in free foreign exchange.
Funds, emanating from local sources, are not eligible to be credited to
these accounts, unless these funds are otherwise remittable outside India,
in terms of the existing Exchange Control Regulations.

FCNR A/c.: These accounts can be opened in four foreign currencies:
* Pounds Sterling;
* US Dollars;
* Japanese Yen;
* Euro.

For the purpose of opening an account, remittance in foreign exchange,
in the same currency, should be received in India. The accounts can be
opened only as fixed deposits, with a minimum maturity of one year and, a
maximum maturity of three years. The principal, as well as interest, earned
on these accounts, is remittable outside India, in the same currency or, in
other convertible currency, as desired by the account holder. The interest,
earned on these deposits, is exempt from Indian Income-tax.

2. Can Non Resident accounts be opened/ operated by the Power of Attorney
holder in India, on behalf of the non-resident?

The accounts cannot be opened by the Power of Attorney holder in
India. However, the latter can operate the accounts for the purpose of local
payments to be made on behalf of the non-resident account holder. The Power
of Attorney holder is not permitted to make gifts from these accounts and,
is not allowed to make remittances outside India.

3. What happens to the status of these accounts when the non-resident
holder becomes a person, resident in India?

The accounts are to be re-designed as resident accounts, when the
non-resident account holder becomes a person, resident in India. In the case
of fixed deposits opened by the account holder, before becoming resident in
India, the contracted rate of interest will be paid till maturity of the
deposits. Similarly, FCNR deposits will be eligible to be held in respective
currencies till maturity of the deposits, even after the non-resident holder
become a resident in India. He will, however, cease to get tax exemption on
interest on the erstwhile deposits (NRE/FCNR deposits), after he becomes
resident in India. In certain situations, it might be advisable for the
account holder to convert the account to a Resident Foreign Currency Account
Deposit (RFC)

4. What are the various facilities available to NRIs/OCBs?

The facilities available to NRIs/OCBs for making investment in India
are as follows:
* opening and maintenance of bank accounts in India;

* investment in shares and securities of Indian companies,
government securities, units of domestic mutual funds and ,deposits with
Indian companies/firms;

* investment in immovable properties in India;

* investment in proprietorship/partnership concerns in India.

5. Are NRIs permitted to send remittances outside India out of the assets
in India that are inherited by them?

Yes. RBI will consider application from NRIs for remittance of assets,
inherited by them in India. Such remittance may be permitted up to US$
100,000 per year.

6. Can a person of Indian origin acquire any immovable property in India
by way of inheritance?

A person of Indian origin, resident outside India, may acquire any
immovable property in India by way of inheritance from a person, resident
outside India, who had acquired such property in accordance with the
provisions of foreign exchange law in force at the time of acquisition by
him or the provisions of Foreign Exchange Management (Acquisition and
Transfer of Immovable Property in India) Regulations, 2000. Immovable
property, by way of inheritance, can also be acquired by a person of Indian
origin resident outside from a person resident in India.

7. Can NRIs and Overseas Corporate Bodies (OCBs) invest in India?

The Government of India has adopted a liberal policy, with respect to
investments by NRIs and OCBs in India. Such investments 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. For
those proposals that do not qualify under the automatic route, Government
approval is granted through FIPB.

8. What is the extent and application of Foreign Exchange Management Act
(FEMA)?

FEMA extends to the whole of India. It also applies to all branches,
offices and agencies outside India, owned or controlled by a person,
resident in India. It also applies to any contravention, there under,
committed in or, outside India, by any person to whom the Act applies.

9. What is the penalty for contravention of FEMA?

Any person, contravening FEMA, shall be liable, upon adjudication, to
a penalty up to three times the sum involved in such contravention, where
such amount is quantifiable, or up to Rupees Two hundred thousand, where the
amount is not quantifiable. In addition, where such contravention is a
continuing one, the person will be liable to further penalty, which may
extend to Rupees Five thousand for every day after the first day, during
which the contravention continues.

10. Can a person of Indian origin resident outside India gift properties
acquired earlier in terms of the provisions of FERA/FEMA?

Yes. A person of Indian origin resident outside India may transfer
residential or commercial property in India by way of gift to a person
resident in India or to a person resident outside India who is a citizen of
India or to a person of Indian origin resident outside India. A Person of
Indian origin resident outside India may also transfer by way of gift
agriculture land/farm house/plantation property in India to a person
resident in India who is a citizen of India.

11. Can an NRI account be opened in the name of crew members of shipping
companies?