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Types Of NRI Bank Accounts

Which are the bank accounts that a NRI can open and maintain? Read to know the answer…

Have you wondered if you become an NRI, whether you can continue with your existing bank accounts? Well, the answer to this question is a “No”. On becoming an ‘NRI’ there is a shift in the bank accounts that you need to maintain. As an NRI you have various options for deposits depending on the accounts that you can maintain are:

Non-Resident Ordinary Rupee Account (NRO Account)

NRO accounts are denominated in Indian rupees and can also be held jointly with resident Indians. NRO accounts can be opened and maintained in the form of savings accounts, current accounts, recurring deposits and term deposits.

  •   The account can be used for depositing remittances received from abroad through normal banking channels, currency carried on temporary visits to India, rent received, interest received, etc.
  • In terms of payments from the account, you can undertake investments allowed by RBI, remit funds up to USD 1 million per financial year, etc.

Non-Resident (External) Rupee Account (NRE Account)

  • NRE accounts can only be opened by the NRI itself. It is denominated in Indian rupees and can be held jointly with resident Indians, subject to certain conditions. NRE accounts can be opened and maintained in the form of savings accounts, current accounts, recurring deposits and term deposits. Balance held in an NRE account can be repatriated freely. The interest income earned on the account and the balance held in NRE accounts are free from income tax and wealth tax.

Overdrawing of a NRE account is permissible to the extent of INR 50,000, provided the repayment is made by remittances received through normal banking channels or a NRE/FCNR account within 2 weeks.

The account can be used for depositing for example:

  • Remittances received from abroad through normal banking channels. Proceeds of account payee cheques, demand drafts or bankers cheques provided they are issued against encashment of foreign currency and the instruments issued to the NRE account holder are supported by a valid encashment certificate.
  •  Funds transferred from other NRE or FCNR accounts.
  • Proceeds from sale of FDI (Foreign Direct Investment).
  • Interest accrued in an NRE account.
  • Interest accrued on government bonds or units of mutual funds purchased through NRE/FCNR (B) accounts.

Through this account, you can undertake local disbursements, transfer funds to other NRE/FCNR accounts, remit funds outside India, invest in shares/securities/papers of Indian companies, etc.

Foreign Currency Non Resident (Bank) Account (FCNR (B) Account)

FCNR (B) accounts can only be opened in the form of term deposits that range from 1 to 5 years.  Rules that extend to account opening, credits and debits applicable to NRE accounts are also applicable here. Only thing, you can avail of a loan up to INR 1 crore and not INR 50,000 as applicable to NRE accounts. These accounts can be opened in any freely convertible foreign currency. Accounts can be held at the same terms and conditions till maturity even if the account holder becomes a resident of India.

To ensure that you open the correct NRI bank account(s), share all details with your bank. This will ensure that you can undertake all the desired transactions from the correct account! 

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