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[Type text] NRI DEPOSITS Submitted By Rajesh H. Chhag ROLL NO- 04 Submitted To : Prof. Gatting Koli Subject Innovation in Banking & Insurance Page 1

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Page 1: Nri Banking Main

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Submitted By

Rajesh H. Chhag


Submitted To :

Prof. Gatting Koli


Innovation in Banking & Insurance

St. Gonsalo Garcia College

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1. Executive Summary

2. Who is NRI ?

3. NRI Definition

4. PIO Card Scheme

5. Types Of A/c.

6. Opening NRI A/c.

7. Conclusion

8. Bibliography

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NRI Banking is becoming popular among the Non-resident customers. As India is

showing progress more & more NRI investing in the country. Banks should try to

give their top class service to the NRI’s as they are looking for convenience, speed,

high yield on investments with manageable risk, reasonable cost & quality


Bank should lower the minimum balance requirement which is Rs.50,000 for

NRI,s as compared to resident who have to keep Rs.1000. The documentation

procedure in case of opening of a/c in banks, investing in any property, for buying

shares & debt. should be reduced and in case of loan at a faster speed.

The services of banks should be fast, accurate & upto the standard as they have to

face competition not only from the local banks but also from the banks based


Banks should also extend their services by providing ATM’s abroad, E -banking

with efficient facility & balance inquiry message through mobilizes.

Investment of NRI would help to bring more inflow of foreign exchange through

taxes & investment policy & this would help Indian government to repay its debt

to the World Bank. Indian government should give their best services &

efforts to encourage NRI to invest in India. This would help our economy to

flourish & grow in future.

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NRI Banking – An Introduction:-

As per RBI guidelines, the residential status of an Indian changes to that of the

Non-Resident, in the event of his stay abroad being more than 183 days. This

period of 183 days is not applicable in certain cases like going overseas for

employment or business. It is mandatory to inform the bank of your change of your

residential status.

With a view to attract the savings and other remittance into India through banking

channels from the person of Indian Nationality / Origin who are residing abroad

and bolster the balance of payment position, the Government of India introduced in

1970 Non-Resident(External) Account Rules which are governed by the Exchange

Control Regulations. The funds held in Non-Resident (External) Accounts (NRE

Accounts) qualify for certain benefits like exemptions from taxes in India, free

repatriation facilities, etc.

NRI banking facilities are available to NRIs and PIOs.

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A Non Resident Indian (NRI) as per FEMA 1999 is an Indian citizen or Foreign

National of Indian Origin resident outside India for purposes of employment,

carrying on business or vocation in circumstances as would indicate an intention to

stay outside India for an indefinite period. An individual will also be considered

NRI if his stay in India is less than 182 days during the preceding financial year.

To meet the specific needs of non-resident Indians related to their remittances,

savings, earnings, investments and repatriation, the Government of India

introduced in 1970 Non-Resident (External) Account Rules which are governed by

the Exchange Control Regulations.

"Non Resident Indian" (NRI) means an Indian citizen or a foreign citizen of

Indian origin (excluding citizens of Bangladesh and Pakistan) residing outside

India. Students studying abroad are also treated as NRIs.

Indian citizen who stays abroad for an indefinite period on employment, business

or on any vocation is a Non-Resident. Diplomats posted abroad, persons posted in

UN Organizations and Officials deputed by PSU on temporary assignments are

also treated as Non-residents.

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An Indian abroad is popularly known as an NRI – but the same has two important

definitions - one coined under the Foreign Exchange Management Act, 1999 –

[FEMA] and the other as per the Income Tax Act, 1961.

FEMA definition:

The most relevant definition concerning an NRI's various bank accounts and

investments in movable and immovable properties in India is the one provided by

Foreign Exchange Management Act, 1999 – [FEMA], which has replaced the

Foreign Exchange Regulation Act , 1973- [FERA] with effect from June 1,2000.

Person Residing Outside India is the term used for an NRI , being a person

who has gone out of India or who stays outside India for the purpose of

employment or carrying on business or vocation outside India or any other

circumstances which indicate his intention to stay outside India for an

uncertain period.

Section 2(v) of FEMA,1999

Person resident in India" means—

a person residing in India for more than one hundred and eighty-two days during

the course of the preceding financial year but does not include—

a person who has gone out of India or who stays outside India, in either case—

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(a) for or on taking up employment outside India, or

(b) for carrying on outside India a business or vocation outside India, or

(c) for any other purpose, in such circumstances as would indicate his intention to

stay outside India for an uncertain period;

a person who has come to or stays in India, in either case, otherwise than—

for or on taking up employment in India, or

for carrying on in India a business or vocation in India, or

for any other purpose, in such circumstances as would indicate his intention to

stay in India for an uncertain period;

(a) any person or body corporate registered or incorporated in India,

(b) an office, branch or agency in India owned or controlled by a person resident outside India,

(c) an office, branch or agency outside India owned or controlled by a person resident in India;

2(w) "person resident outside India" means a person who is not resident in India;

Non Resident Indian, the phrase is for the first time defined in the regulations as

“a person resident outside India who is either a citizen of India or a person of

Indian Origin".

Recently RBI has clarified that students studying abroad also be treated as NRIs

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under FEMA and accordingly be eligible for foreign investments and


And the definition of "a person resident outside India " is simply put as " a

person who is not Resident in India."

NOW, reading both the definitions together, it can be summarized that both:

an Indian Citizen residing outside India and also

a Foreign Citizen of Indian origin residing outside India are defined as Non-

Resident Indians.

Person of Indian Origin:

F.E.M.(Deposit) Regulations define a Person of Indian Origin (PIO) as:

a person, being a citizen of any country other than Pakistan and Bangladesh,

who at any time held an Indian Passport. or

a person who himself or either of his parents or any of his grandparents were

citizens of India, or

a spouse of an Indian citizen, or

a spouse of a person covered under (i) or (ii) above.

2(xii) 'Person of Indian Origin' means a citizen of any country other than

Bangladesh or Pakistan, if

he at any time held Indian passport; or

he or either of his parents or any of his grand- parents was a citizen of India by

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virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955) or

the person is a spouse of an Indian citizen or a person referred to in sub-clause

Person of Indian Origin (PIO) defined under Regulations re: Immovable

Property in India:

This definition is further narrowed when it comes to rules regarding acquisition

and transfer of immovable property in India. Probably with an intention of

ensuring & restricting control of immovable properties in the hands of strictly

defined persons of Indian Origin only, this definition is further narrowed to

exclude individuals being citizens of Pakistan, Bangladesh, Sri Lanka,

Afghanistan, China, Iran, Nepal and Bhutan.

As regards immovable property transactions it may be noted that herein the

person's father or grandfather is included unlike parents or grandparents and spouse

in earlier definition.

Accordingly a Person of Indian Origin is defined herein as:

a) Who held an Indian Passport at any time?

An individual other than citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan,

China, Iran, Nepal and Bhutan, or

b) Who himself or his father or grandfather was a citizen of India.

[Regulation 2(c) of F.E.M. (Acquisition and Transfer of Immovable Property in

India) Regulation 2000]

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2(c) 'a person of Indian origin' means an individual (not being a citizen of

Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or

Bhutan), who

(a) at any time, held Indian passport; OR

(b) who or either of whose father or whose grandfather was a citizen of India by

virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);

Conditions of number of days stay in India :-

No doubt, Foreign Exchange Management Act, 1999 definition has also

incorporated an NRI's stay of 182 days or less during a year in India, but simply

speaking if a person of Indian origin has gone out of India for settlement he is to

be treated as an NRI irrespective of number of days he has stayed in India.

Stay in India during visits:

The Act also lays down that such a person will continue to be an NRI during his

visit/stay in India provided he has not returned to India for taking up employment

or carrying on business or vacation or any other circumstances as would indicate

his intention to stay in India for an uncertain period. Accordingly, an NRI settled

abroad, irrespective of the number of days stay in India will continue to be an

NRI during his visit to India provided he has not returned to India for permanent


"Overseas Corporate Body" (OCB) means a Company, Partnership Firm,

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Society etc. wherein 60 % or more ownership lies with NRIs or a Trust wherein

60 % or more financial interest is irrevocably held by NRIs.

2(xi) " Overseas Corporate Body (OCB)" means a company, partnership firm,

society and other corporate body owned directly or indirectly to the extent of at

least sixty per cent by Non-Resident Indians and includes overseas trust in which

not less than sixty per cent beneficial interest is held by Nonresident Indians

directly or indirectly but irrevocably.


The Government has launched a comprehensive Scheme for the Persons of Indian

Origin-called the ‘PIO Card Scheme’. Under this Scheme, Persons of Indian Origin

up to the fourth generation (great grandparents) settled throughout the world,

except for a few specified countries, would be eligible. The Card would be issued

to eligible applicants through the concerned Indian Embassies/High

Commissions/Consulates and for those staying in India on a long term visa, the

concerned Foreigners Regional Registration Officer (Delhi, Mumbai, Calcutta,

Chennai) would do the same. The fee for the card, which will have a validity of 20

years, would be US$1000.

In this scheme, unless the context otherwise requires-

"Person of Indian origin" means a foreign citizen (not being a citizen of Pakistan,

Bangladesh and other countries as may be specified by the Central Government

from time to time) if,

He/she at any time held an Indian passport; or

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born in and permanently resident in India as defined in the Government of India

Act, 1935 and other territories that became part of India thereafter provided

neither was at any time a citizen of any of the aforesaid countries (as referred to

in 2(b) above); or

He/she is a spouse of a citizen of India or a person of Indian origin covered

under (i) or (ii) above.

Besides making their journey back to their roots simpler, easier and smoother,

this Scheme entitles the PIOs to a wide range of economic, financial, educational

and cultural benefits. The benefits envisaged under the Scheme include:-

No requirement of visa to visit India;

No requirement to register with the Foreigners Registration Officer if continuous

stay does not exceed 180 days. If continuous stay exceeds 180 days, then

registration is required to be done within a period of 30 days of the expiry of 180


Parity with Non-Resident Indians in respect of facilities available to the latter in

economic, financial, educational fields etc. These facilities ill include:

Acquisition, holding, transfer and disposal of immovable properties in India

except of agricultural/plantation properties;

Admission of children in educational institutions in India under the general

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category quota for NRIs- including medical/engineering colleges, IITs, IIMs etc.

Various housing schemes of Life Insurance Corporation of India, State

Governments and other Government agencies;

All future benefits that would be extended to NRIs would also be available to

the PIO Card holders; However, they shall not enjoy political rights in India.

What is an OCB?

Overseas Corporate Bodies (OCBs) are bodies predominantly owned by

individuals of Indian nationality or origin resident outside India and include

overseas companies, partnership firms, societies and other corporate bodies which

are owned, directly or indirectly, to the extent of at least 60% by individuals of

Indian nationality or origin resident outside India as also overseas trusts in which at

least 60% of the beneficial interest is irrevocably held by such persons. Such

ownership interest should be actually held by them and not in te capacity as

nominees. The various facilities granted to NRIs are also available with certain

exceptions to OCBs so long as the ownership/beneficial interest held in them by

NRIs continues to be at least 60%

What are the various facilities available to NRIs/OCBs?

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NRIs/OCBs are granted the following facilities:

Maintenance of bank accounts in India.

Investment in securities/shares of, and deposits with Indian firms/ companies.

Investments in immovable properties in India.


NRI-Banking follows a modular structure. The various modules render our NRI

Banking solution offerings (which are stated below) in a seamlessly integrated


The Masters module permits maximum parameterization to be done, enabling the

end user to make all changes with regard to Interest Rates or with regard to any

changes as per directives from Head Office / RBI.

Maintains Bank, Branch and holiday details

Facilitates maintenance of Instrument, Interest rate and overdue interest rate details

Masters. Inventory, Currency, Country, Exchange rate and return reason details are

also maintained Favors opening, authorization and freezing of Accounts

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Transaction entry and passing is made easy

Provisions availed for issuing, passing and stop payment of cheques.

Supports Account closure, Preclosure, Renewal & overdue renewal of Deposits.

Aids Day Begin, Day End & Month End Processing

Processes Quarterly, and transfer to Inoperative & Half Yearly - SB Interest


Hastens Deposit Receipt Printing, Changing to RFC, Interest Payment & Overdue


Supports Acceptance and Execution of standing instruction.

Types of accounts

NRI accounts are maintained by banks which hold authorized dealers' licences

from the Reserve Bank of India. Some cooperative and commercial banks have

also been specifically permitted to maintain NRI accounts in rupees even though

they are not authorized dealers. The financial budget for 2007-08 extends NRI

accounts to regional rural banks (RRBs) as well. This would boost remittances

from NRIs particularly in Bihar, Kerala, Uttar Pradesh and Gujarat where a large

number of persons from rural areas from these states are employed overseas.

Banking Laws for NRIs allow for accounts with authorized dealers to be

maintained in Indian rupees and in foreign currency.

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Various accounts:-

NRE A/c - non residential (external) rupee account.

FCNR-B A/c - foreign currency non residential account.

NRO A/c - non resident ordinary account.

RFC A/c - resident foreign currency account.

All NRIs can open such accounts, with the exception of individuals residing in

Pakistan and Bangladesh, who require special permission from the RBI. Joint

accounts of two or more non-residents and nomination facility are permitted.

While the FCNR (B) is a term deposit only, the NRE and NRO accounts can be

operated as either savings, current, recurring or fixed deposit accounts. As for

interest rates, FCNR (B) and NRE are subject to a cap, and should not exceed the

LIBOR/SWAP rates. In the case of NRO accounts, rates are determined by the

banks. The interest rates, currently at 3.5% apply to a period of 1 to 3 years.

The total NRE/ FCNR deposits during 2006-2007, as per RBI statistics, are USD

37,751 million and are expected to grow with regional rural banks also mopping up

funds. Banks are expected to offer lucrative interest rates to bolster NRI funds.

Banks offer two types of accounts to NRIs, based on their reparability.

Repatriable Accounts

Funds that can be transferred or repatriated abroad are maintained in a Non

Resident External Bank account. Generally, funds remitted from outside India are

credited to this account. Investments made from foreign funds can be repatriated

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overseas, and such investments are maintained in a Repatriable Demat account.

Non-Resident (External) Rupee (NRE) Accounts

Both Principal and Interest can be repatriated/transferred out of India

Savings rate on NRE accounts is at par with savings rates in resident accounts

Term deposits can be made for 1 to 3 years.

The interest rates on (NRE) Term deposits cannot be higher than LIBOR/SWAP

rates as on the last working day of the previous month, for US dollar of

corresponding maturity plus 50 basis points.

The interest rates on three year deposits also apply in case the maturity period exceeds three years. The change in interest rate also applies to NRE deposits renewed after their present maturity period.

FCNR (B) Accounts

As in NRE accounts, both principal and interest are repatriable.

Presently, deposits can be made in 6 specific foreign currencies (US Dollar,

Pound Sterling, EURO, Japanese Yen, Australian Dollar and Canadian Dollar).

Interest rate- Fixed or floating within the limits of LIBOR/SWAP rates for the

respective currency/corresponding term minus 25 basis points (except Japanese


The term of deposits can range between 1 to5 years.

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NRO Accounts

Only current earnings are repatriable.

Savings NRO accounts are normally operated to credit rupee income from

shares, interest, rent from property in India, etc.

In case of term deposits, banks are allowed to determine their own interest rates.

Banks can allow remittance up to USD 1 million per financial year for bonafide

purposes from balances in the NRO accounts once taxes are paid out. This limit

includes the sale proceeds of immovable properties held by NRIs and PIOs.

Resident Foreign Currency (RFC) Account

NRIs and PIOs returning to India can maintain an RFC account with an authorized

bank in India to transfer funds from their NRE/FCNR (B) accounts. Proceeds of

assets held outside India before their return to India can be credited to the RFC

account. These funds are free from all restrictions as to their utilization or in

investment in any form outside India.

Non-Repatriable Accounts

Non-repatriable funds are those which cannot be taken out of India. These have to

be maintained in a separate bank account i.e. a Non Resident Ordinary Bank

account. Investments made from non-repatriable accounts cannot be repatriated but

have to be maintained in a Non-Repatriable Demat account. Money once

transferred from an NRE account to an NRO account cannot be transferred back to

an NRE account.

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Non Resident Ordinary (NRO) Account

When a resident becomes an NRI, his existing savings account is designated as a

Non-resident Rupee (NRO) account.

The NRO accounts could be maintained in the nature of current, saving,

recurring or term deposits. NRIs can also open NRO accounts for depositing

their funds from local transactions.

The interest earned from NRO accounts is accountable to tax laws.

NRO accounts can be opened in the name of NRIs who have left India to take up

employment or business temporarily or permanently in a foreign country.

Funds from NRO accounts are not repatriable or transferred to NRE accounts

without the prior approval of the RBI.

However, NRIs, PIOs, Foreign Nationals, retired employees or non-resident

widows of Indian citizens can remit, through the Authorized Dealer, up to USD

one million per calendar year from the NRO account or from income from sale of

assets in India



To open an NRE account please complete the account opening form  and mail it to

the branch of your choice along with ;

Passport copy

Visa/residence permit

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2 photographs

initial money remittance

Your signature may be verified by anyone of the following;

Indian Embassy/consulate

Any person known to the Bank

Notary public

Any of our offices abroad

You can open

NRE Saving Bank a/c / Current Accounts

Fixed Deposits in Indian Rupees

Fixed Deposits in Foreign Currency

NRO accounts (Rupee accounts for crediting income in India )

You can authorize a resident to operate your account through a Power of Attorney or Letter of Authority

Nomination Facility available (Nominee can be a resident Indian also)

Procedures & Benefits:

Non-Resident accounts can be opened along with your remittances through

Banking channel.

Photograph shall be enclosed with the opening form.

There is no ceiling on the amounts remitted for your credit in Non-Resident

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When the NRI depositor returns to India, the NRE account will be automatically

treated as Resident account. However NRE term deposit will continue to earn

same rate till maturity even after such conversion.

NRE accounts earn more interest than domestic deposits.

Nomination facilities are available for registration in favor of a non resident or


Loans against deposits are allowed for purposes other than investment up to

90% of the deposit.

The income from deposit is free from Indian Income Tax.

It is also free from Gift tax for one time gifting.

Documents Required:-

In case account opened in person: Page 21

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Indian passport with overseas resident address or work permit (i.e. Green Card as

residence permit for USA, H1 Visa as work permit for USA or Hongkong ID card

for residence of Hongkong)

Separate proof of Non Resident status if the passport holds Indian address and

resident Visa permit is not included in passport. Photograph of individual account


For persons employed with foreign shipping company

Initial work contract

Last wage slip

For contract employees

Last work contract

Letter from local agent confirming next date of joining the foreign vessel (not

more than six months from date of last return to India)

Principal's overseas address or current work contract

In case of documents sent by mail

All the relevant above mentioned documents / signatures to be attested by any

one of the following:

Indian embassy overseas notary

Local bank

Minimum balance in which one can open an account (Differs from bank to

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NRO – Saving Account – Rs.5,000/-

NRO - Current Account – Rs.10,000/-

NRO – Term Deposit Account – Rs.5,000/-

NRE – Savings Account – Rs.5,000/-

NRE – Current Account – Rs.10,000/-

NRE – Term Deposit Account – Rs.10,000/-

FCNR – Term Deposit Account – USD 500/- or its equivalent in GBP or Euro

If you submit the money for opening/credit to an account. Frequency of Interest

payment on accounts:

NRO – Term Deposit Account – Half yearly

NRE – Savings Account – Quarterly

NRE – Term Deposit Account – Half yearly

FCNR – Term Deposit Account – Quarterly


Type of account Joint Account with

Resident Indians

Joint Account with

Non-Resident Indians

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NRO Yes Yes

NRE No Yes


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At the cost of repetition, it is once again said that an NRI permanently settled and

residing outside India will continue to be treated as an NRI under

F.E.M.A.irrespective of the number of days of his stay in India or otherwise. NRI

Banking today stands as one of the most profitable business for banks. With India

having one of the largest NRI populations and a very prosperous one too, NRI

banking is one hot business no bank can afford to ignore today. India needs foreign

exchange reserves for its developing economy. Realizing this, banks are shaping

up their strategies in order to attract this NRI money. Further with India pushing

for Capital Account Convertibility, and the success of Pravasi Bharatiya Diwas,

prospects for NRI banking has never been so good than today.

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Nri Banking

Articles in Newspapers

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