Banking Facilities for NRIs

Banking Facilities for NRIs

Opening of Accounts:

NRIs can open two types of accounts namely – Rupee accounts and Foreign Currency Accounts.

NRO – Non Resident Ordinary Rupee account allows remittances from abroad and all legitimate local remittances into the account. Usage of funds locally is freely allowed but remittances abroad are not permitted even though some of the remittances might have been received in the account from abroad.

NRE – Non Resident External Rupee account allows remittances from abroad. Local funds due to the account holder on a repatriable basis can also be credited into the account. Free remittance of funds abroad is allowed.

FCNR – Foreign Currency Non-Resident accounts are different types of Term Deposits maintained in approved foreign currencies. The accounts are opened for periods varying from one to five years and the interest offered is fixed by the bank based on International movement of interest rates and as per the regulations of the Reserve Bank of India. The approved currencies are Pound Sterling, US Dollar, Euro, Australian and Canadian Dollar. The interest accrued and the principal amounts in these accounts are freely repatriable abroad.

Investment:

NRIs are permitted to invest in Units of UTI or Government securities through authorised dealers or directly to UTI. If the funds for investment had come from abroad, then repatriation of sale proceeds abroad is allowed.  NRIs also are permitted investment in equity and debentures in companies that are not engaged in agriculture/ plantation activities on non-repatriation basis.

NRIs are allowed to purchase shares disinvested in Public Sector Undertakings not exceeding 1% of the paid up capital of the PSUs. If the purchase amount has come from abroad or NRE/FCNR accounts then the repatriation of sale proceeds abroad is allowed.

NRIs are also allowed to purchase residential properties up to two houses through funds from abroad or from the NRE/FCNR accounts. Commercial properties other than agricultural land/farm house/ plantation can also be purchased by the NRIs. Acquisition of immovable properties as above is to be reported to RBI in the prescribed form within 90 days of acquisition. Repatriation of sale proceeds of these properties are allowed up to the extent the initial investment had come in from abroad.   

NRIs can avail housing loans from institutions providing such loans as HDFC, LIC Housing Finance etc. NRIs can also effect sale of shares and debentures of Indian companies through authorized stock exchanges on non-repatriation basis.

While income earned in NRE and FCNR accounts are exempted from Income Tax, all other income of NRIs are taxable in the country unless otherwise specified as exempted..

RBI allows investment in shares and debentures in specific schemes on repatriable basis provided the original investment had come from abroad or from NRE/FCNR accounts.

RBI also allows NRI investment on repatriation basis on selected industries with sectoral caps.    

Under Portfolio Investment, NRIs can purchase shares / convertible debentures on repatriation / non-repatriation basis up to 5% of the paid capital / paid up value of each series of debentures.

Subject to Government approval NRIs can invest in Priority industries other than those specifically prohibited.  NRIs can invest upto 100% in shares / debentures of Export Oriented Units are in those Units located in Export Processing Zones.