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Q. 1 Can accounts be maintained by NRIs with any bank in India?

Ans. Banks holding authorised dealers' licences (i.e. banks authorised to deal in foreign exchange) or banks specifically authorised in this behalf by Reserve Bank can only maintain accounts in the names of NRIs. Certain co-operative/commercial banks (referred to as authorised banks) have been specifically permitted to maintain accounts of NRIs expressed in rupees even though they are not authorised dealers.

Q.2 Are NRIs permitted to maintain accounts in rupees and in foreign currency?

Ans. Yes. Accounts can be maintained by NRIs in rupees as well as in foreign currency. Accounts in foreign currencies can, however, be maintained with authorised dealers only.

B. Rupee Accounts

Q.3 What are the different types of rupee accounts permitted to be maintained?

Ans. Four types of rupee accounts viz. Non-resident (External) Rupee Accounts (NRE), Non-Resident (Special) Rupee (NRSR) Account, Ordinary Non-resident Rupee Accounts (NRO) and Non-resident (Non-repatriable) Rupee deposit accounts (NRNR) are permitted to be maintained by NRIs.

Q.4 Can NRIs maintain current/savings/fixed deposit rupee accounts with authorised dealers/authorised banks in India?

Ans. NRO, NRE and NRSR accounts can be maintained in current/savings/fixed deposits form while NRNR account can be only in fixed term deposits.

Q.5 Can proceeds of foreign currency notes / travellers cheques be credited to NRE accounts without any restriction?

Ans. Authorised dealers have been permitted to credit the proceeds of foreign currency notes/travellers cheques brought by the account holder from abroad during his visit to India provided they are tendered in person. Where the amount of foreign currency notes tendered exceeds U.S.$ 5000/- or its equivalent or the total amount of currency notes and travellers cheques tendered for credit to NRE accounts exceeds U.S.$ 10,000 or its equivalent, it should have been declared to the Customs on the Currency Declaration Form (CDF) at the time of the account holder's arrival into India. Further, in the case of travellers cheques, they should be presented by the account holder himself and discharged by him in the presence of the official of the concerned bank.

Q.11 Can NRE accounts be opened by the power of attorney holder in India on behalf of a non-resident?

Ans. No.

Q.6 Can resident Power of Attorney holder operate on the NRE accounts?

Ans. Yes, but only for local payments to be made on behalf of the account holder. In cases where the account holder or a bank designated by him has been granted permission by Reserve Bank to make investments in India, the Power of Attorney holder (POA) is permitted to operate the account to facilitate such investments. POA holders cannot, however, make gifts from NRE accounts.

Q.7 Can Power of Attorney holder credit proceeds of foreign currency notes/bank notes and travelers cheques to the NRE accounts?

Ans. No.

Q.8 What is the distinction among NRE account NRSR account and NRO account?

Ans. Balances held in NRE accounts can be repatriated abroad freely, whereas funds in NRSR and NRO account cannot be remitted abroad but have to be used only for local payments in rupees. Consequently, funds remitted from abroad or local funds which can otherwise be remitted abroad to the account holder can only be credited to NRE accounts. Funds due to the non-resident accountholder which do not qualify, under the Exchange Control regulations, for remittance outside India are required to be credited to NRO accounts. The accountholders can freely transfer funds from NRO/NRE/FCNR accounts to NRSR account but transfer of funds from NRSR account to other accounts of NRI is not permissible irrespective of the source of funds.

Q.9 Can NRO/NRE/NRSR accounts be maintained by NRIs jointly with residents?

Ans. NRO & NRSR accounts can be held jointly with residents. However, NRE accounts cannot be held jointly with residents.

Q.10 What is the rate of interest payable on such accounts?

Ans. Banks in India have been given freedom to decide interest rates on all non-resident rupee accounts. However, the rates of interest on deposits are subject to change as per the directives issued by Reserve Bank (Department of Banking Operations and Development) from time to time.

Q.11 Are debits and credits to NRO accounts allowed freely by banks maintaining the accounts?

Ans. Yes. Debits for local payments are allowed freely. Funds representing legitimate dues of the account holder or proceeds of remittances received from abroad through banking channels are permitted to be credited freely. Debits to the accounts for the purpose of investment in India and credits representing sale proceeds of investments are allowed subject to the accountholder giving an undertaking at the time of opening the account to the effect that such investments/disinvestments would be covered either by the general or special permission of Reserve Bank.

Q.12 What are the admissible debits and credits to NRE accounts?

Ans. Debits for local payments/investments are allowed freely. Credits to an account, of funds emanating from a local source would be permissible only if the funds are of a repatriable nature i.e. funds which are eligible to be remitted abroad.

Q.13 Can funds in NRE/NRO/NRSR accounts be repatriated outside India?

Ans. Funds held in NRE accounts can be repatriated abroad freely. Funds held in NRO accounts which would generally be from local source cannot be repatriated outside India. Funds held in NRSR account also cannot be repatriated.

Q.14 Can funds in NRE/NRO/NRSR accounts be utilised for payment of air fare to/from and other travel related expenses in India of the account holder and/or his dependents?

Ans. Yes. Banks maintaining such accounts have been authorised to permit such payments. Airlines/shipping companies and their agents have also been permitted to accept payments in rupees.

Q.15 Are temporary over drawings permitted in NRO Savings Bank accounts?

Ans. Yes. Authorised dealers may allow such overdrawings up to Rs. 20,000/- subject to the condition that the overdrawings together with the interest payable thereon are cleared within a period of two weeks.

Q.16 Are NRO/NRE/NRNR account holders eligible for loans/overdrafts against their fixed deposits?

Ans. Yes, except for the purpose of relending, carrying on agricultural/plantation activities or for investment in real estate business. Loans against NRE fixed deposits can, however, be utilised for investments in India on non-repatriation basis, in certain specified areas and for acquisition of flats/houses subject to prescribed conditions.

Q.17 What are the rates of interest charged on such loans?

Ans. The rate of interest on such loans will be as per the directive issued by Reserve Bank (Department Banking Operations and Development) from time to time.

Q.18 Can loans raised against NRE fixed deposits be repaid out of funds in NRO/NRSR accounts?

Ans. The loans raised against NRE deposits can be repaid out of funds held in NRO/NRSR accounts but in such cases, the interest would be charged at commercial rate in force from time to time.

Q.19 Can a third party in India take loans against the NRO fixed deposit accounts of NRI?

Ans. Yes. Subject to certain conditions.

Q.20 Is nomination allowed in NRO/NRE/NRSR accounts?

Ans. Yes.

Q.21 Is repatriation of funds belonging to non-resident nominees permitted?

Ans. Funds held in NRO/NRSR accounts will be allowed to be credited to the non-resident nominee's NRO/NRSR account only and no repatriation is permitted. Remittance of funds to the non-resident nominee from the deceased person's NRE account will be permitted by authorised dealers.

Q.22 Is transfer of funds between NRE accounts maintained by two different account holders permitted?

Ans. Yes. Authorised dealers can permit transfer of funds from the NRE account of one person to the NRE account of another person. Authorised dealers can transfer funds held with them in NRE account to the account of same person held with another authorised dealer. Funds held in NRE account can also be transferred to other authorised dealer for the purpose of opening NRE account in the name of the same person provided a certificate confirming the NRE status of the account from which funds are transferred is produced. Transfer of funds by way of gift can be permitted by authorised dealer after obtaining an undertaking from the transferee/transferee's bank that gift tax rules/regulations have been complied with.

Q.23 At what rates are remittances to India by NRIs for credit to NRE/NRO/NRNR/NRSR accounts converted into rupees?

Ans. Remittances for credit to rupee accounts (i.e. NRE/NRO/NRNR/NRSR accounts) maintained by NRIs are converted at the market rate.

Q.24 Is there any scheme under which non-residents other than NRIs can also keep rupee deposits with banks in India?

Ans. Yes, NRIs and other non-residents can maintain NRO rupee accounts as well as keep deposits with banks in India under NRNR Rupee Deposit Scheme.

Q.25 How should an account under the Non-Resident Non-repatriable (NRNR) Rupee Deposit Scheme be opened?

Ans. Such an account can be opened with an authorised dealer in India by remitting funds from abroad in any convertible foreign currency. Under the NRNR Scheme, deposits designated in rupees can be kept for periods ranging from 6 months to 3 years. NRIs can also open such accounts by transferring funds from their existing NRE/FCNR accounts. No penal interest is chargeable for premature withdrawal of NRE/FCNR deposits for the purpose of making investment in the scheme if the deposit is to be kept with the same authorised dealer.

Q.26 Can the principal or the interest accrued on NRNR deposits be repatriated outside India at any time?

Ans. The principal amount of the deposit is not eligible for repatriation. Interest earned up to 30th September 1994 is also not eligible for repatriation. Interest earned for the period beginning 1st October 1994 is, however, eligible for repatriation or can be utilised for opening fresh NRE/FCNR deposits, or can be credited to existing NRE accounts.

Q.27 Can the principal together with the interest accrued on NRNR deposits be renewed, on maturity?

Ans. Only the principal amount of deposit could be renewed under the scheme upto 30th September 1994. However, since interest accrued for the period from 1st October 1994 is repatriable, the principal amount together with interest accrued for the period from 1st October 1994 can be renewed under the scheme.

Q.28 Can loans/overdrafts be availed of against the security of NRNR deposits?

Ans . Authorised dealers are permitted to grant loans/overdrafts for purposes other than investment.

Q.29 What is the status of NRO/NRSR/NRE accounts on the return of the account holder to India?

Ans. Banks have been advised to redesignate such accounts as resident accounts on return of the account holder to India.

Q.30 Does the account holder suffer any loss of interest on such redesignation of accounts?

Ans. No Banks have been advised to continue to pay interest at the contracted rate till the maturity of the deposit if the deposit is held for the full term even after conversion into resident rupee account.

C. Foreign Currency Accounts

Q.31 Can accounts be maintained by NRIs/OCBs in foreign currencies?

Ans. Yes. Accounts in foreign currencies (FCNR accounts) can be maintained by NRIs/OCBs with authorised dealers in India.

Q.32 What are the foreign currencies in which such accounts can be maintained?

Ans. FCNR Accounts can be maintained in Pound Sterling, U.S. Dollar, Deutsche Mark (upto December 2001), Euro and Japanese Yen.

Q.33 Are FCNR accounts permitted to be maintained in the form of current/savings accounts?

Ans. No. FCNR accounts can be maintained only in the form of 'term deposits', i.e. a deposit kept for fixed periods ranging from 6 months to 3 years.

Q.34 Is premature withdrawal of the FCNR term deposit allowed?

Ans. Yes. However, this is subject to the levy of a penalty.

Q.35 What is the penalty for premature withdrawal of a FCNR deposit?

Ans. Interest in such cases is paid at one per cent below the interest rate payable for the period for which the deposit has actually run. Interest on deposits is, however, payable only if they are kept for a minimum period of six months. Incidentally, these matters are governed by the instructions/directives issued by Reserve Bank (Department of Banking Operations and Development) from time to time.

Q.36 If a FCNR deposit of 6 months maturity is withdrawn prematurely, would any interest be payable?

Ans. No. While the premature withdrawal would be allowed, no interest would be payable. For such premature withdrawals the bank may levy penalty as per their discretion.

Q.37 Are the interest rates on FCNR deposits liable for periodical revision?

Ans. Yes. The Banks have been permitted to offer interest on such deposits at rates not in excess of LIBOR minus 25 basis points in respect of the deposits of 6 months and above but less than one year and LIBOR + 50 basis points in respect of deposits of maturity of one year and above. (LIBOR rate prevailing on the last working day of the previous week for the relevant maturity and currency.) Subject to this guideline, banks can offer either fixed or floating rate of interest on such deposits. [The rates of interest are subject to change in accordance with the directives issued by Reserve Bank (Department of Banking Operations and Development) from time to time

Q.38 What about debits to FCNR accounts for local payments?

Ans. Debits for local payments in rupees are allowed freely. As regards debits for investments in India, please see Chapters III and IV.

Q.39 Are funds in FCNR accounts freely repatriable abroad?

Ans. Yes. Authorised dealers maintaining these accounts would allow repatriation abroad of these funds.

Q.40 Can FCNR deposits be held jointly with residents?

Ans. No.

Q.41 Is nomination allowed in FCNR accounts?

Ans. Yes.

Q.42 Is repatriation of FCNR funds to non-resident nominees permitted?

Ans. Yes.

Q.43 What is the status of FCNR accounts on the return of the account holder to India?

Ans. Banks would treat the deposits held in FCNR accounts as resident deposits but would continue to pay interest at the contracted rate till maturity of the deposit.

Q.44 Can NRIs invest their funds in Government securities or Units of Unit Trust of India (UTI)?

Ans. Yes. NRIs are freely permitted to invest their funds in Government securities or Units of UTI through authorised dealers. Units can also be purchased directly from UTI.

Q.45 Can NRIs make investments in National Savings Certificates issued by Post Offices in India?

Ans. Yes. Investments in National Savings Certificates can be made by NRIs subject to the terms and conditions applicable to the sale/issue of such certificates. However, NRIs are not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Patra.

Q.46 Can Government securities/units be freely transferred or sold?

Ans. Yes, provided the transfers/sales are arranged through an authorised dealer. Units can, however, be repurchased directly by UTI.

Q.47 Are sale/maturity proceeds of Government securities/Units/National Savings Certificates allowed to be repatriated abroad?

Ans. If such securities were purchased out of funds remitted from abroad or out of NRE/FCNR accounts, sale/maturity proceeds can be repatriated. Sale/maturity proceeds of securities purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be remitted abroad. Interest earned during the financial .

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