NRI Banking – An Introduction:-As per RBI guidelines, the residential status of an Indian changes to that of theNon-Resident , in the event of h is s tay abroad being more than 183 days. Thisper iod of 183 days is not appl icable in cer ta in cases l ike 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 bankingchannels from the person of Indian Nationality / Origin who are residing abroadand bolster the balance of payment position, the Government of India introduced in1970 Non-Resident(External) Account Rules which are governed by the ExchangeControl Regulations. The funds held in Non-Resident (External) Accounts (NREAccounts) qualify for certain benefits like exemptions from taxes in India, freerepatriation facilities, etc.NRI banking facilities are available to NRIs and PIOs

WHO IS A NON – RESIDENT  INDIAN  [NRI]    ? ANon Resident Indian(NRI) as per FEMA 1999 is an Indian citizen or ForeignNational of Indian Origin resident outside India for purposes of employment,carrying on business or vocation in circumstances as would indicate an intention tostay outside India for an indefinite period. An individual will also be consideredNRI 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  Indiaintroduced in 1970 Non-Resident (External) Account Rules which are governed bythe 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 outsideIndia. Students studying abroad are also treated as NRIs.Indian

citizen who stays abroad for an indefinite period on employment, businessor on any vocation is a Non-Resident. Diplomats posted abroad, persons posted inUN Organizations and Officials deputed by PSU on temporary assignments arealso treated as Non-residents

PIO CARD SHCEMEThe Government has launched a comprehensive Scheme for the Persons of IndianOrigin-called the ‘PIO Card Scheme’. Under this Scheme, Persons of Indian Originup to the four th generat ion (great grandparents) set t led throughout the wor ld, except for a few specified countries, would be eligible. The Card would be issuedto  eligible  applicants through  the  concerned  Indian Embassies/HighCommissions/Consulates and for those staying in India on a long term visa, theconcerned Foreigners Regional Registration Officer (Delhi, Mumbai, Calcutta,Chennai) would do the same. The fee for the card, which will have a validity of 20years, 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 Governmentfrom time to time) if,He/she at any time held an Indian passport; or He/she or either of his/her parents or grandparents or great grandparents wasborn in and permanently resident in India as defined in the Government of IndiaAct, 1935 and other territories that became part of India thereafter providedneither was at any time a citizen of any of the aforesaid countries (as referred toin 2(b) above); or He/she is a spouse of a c i t izen of India or a person of Indian or ig in coveredunder (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,educationaland  cultural  benefits.  The  benefits envisaged  under  the  Schemeinclude:-No requirement of visa to visit India;No requirement to register with the Foreigners Registration Officer if continuouss t a y d o e s n o t e x c e e d 1 8 0 d a y s . I f c o n t i n u o u s s t a y e x c e e d s 1 8 0 d a y s , t h e n registration is required to be done within a period of 30 days of the expiry of 180days;Parity with Non-Resident Indians in respect of facilities available to the latter ineconomic, financial, educational fields etc. These facilities ill include:Acquisition, holding, transfer and disposal of immovable properties in Indiaexcept of agricultural/plantation properties;Admission of children in educational institutions in India under the generalcategory quota for NRIs- including medical/engineering colleges, IITs, IIMs etc.Various  housing  schemes  of  Life  Insurance  Corporation  of  India, StateGovernments and other Government agencies;All future benefits that would be extended to NRIs would also be available tothe PIO Card holders;However, they shall not enjoy political rights in India.

What is an OCB?Overseas  Corporate  Bodies  (OCBs)  are  bodies  predominantly  owned byindiv iduals  of   Indian nat ional i ty  or  or ig in   res ident  outs ide  India and  inc ludeoverseas companies, partnership firms, societies and other corporate bodies whichare 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 atleast 60% of the benef ic ia l in terest is i r revocably held by such persons.

Suchownership in terest should be actual ly held by them and not in te capaci ty asnominees. The various facilities granted to NRIs are also available with certainexceptions to OCBs so long as the ownership/beneficial interest held in them byNRIs continues to be at least 60%What are the various facilities available to NRIs/OCBs?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.13

 NRI BANKINGKEY BENEFITSNRI-Bankingfollows a modular structure. The various modules render our NRIBankingsolution offerings (which are stated below) in a seamlessly integratedfashion.The Masters module permits maximum parameterization to be done, enabling theend user to make all changes with regard to Interest Rates or with regard to anyc h a n g e s   a s   p e r d i r e c t i v e s   f r o m   H e a d   O f f i c e   / R B I . Maintains Bank, Branch and holiday detailsFacilitates maintenance of Instrument, Interest rate and overdue interest rate detailsMasters. Inventory, Currency, Country, Exchange rate and return reason details arealso maintainedFavors opening, authorization and freezing of AccountsTransactione n t r y   a n d  p a s s i n g   i s   m a d e e a s y Provisions availed for issuing, passing and stop payment of cheques.Supports Account closure, Preclosure, Renewal & overdue renewal of Deposits.A i d s   D a y   B e g i n ,   D a y   E n d   & M o n t h   E n d P r o c e s s i n g Processes Quarter ly ,  and  t ransfer   to   Inoperat ive & Hal f  Year ly   -  SB  InterestCalculation.Hastens Deposit Receipt

Printing, Changing to RFC, Interest Payment & OverdueProcess.Supports Acceptance and Execution of standing instruction.

 NRI BANKINGTypes of accountsNRI accountsare maintained by banks which hold authorized dealers' licencesfrom theReserve Bank of India. Some cooperative and commercial banks havealso been specifically permitted to maintain NRI accounts in rupees even thoughthey are not authorized dealers. The financial budget for 2007-08 extends NRIaccounts to regional rural banks (RRBs) as well. This would boost remittancesfrom NRIs particularly in Bihar, Kerala, Uttar Pradesh and Gujarat where a largenumber of persons from rural areas from these states are employed overseas.B a n k i n g   L a w s   f o r   N R I sa l l o w   f o r   a c c o u n t s   w i t h   a u t h o r i z e d   d e a l e r s   t o  b e maintained in Indian rupees and in foreign currency.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 inPakistan and Bangladesh, who require specia l permiss ion f rom the RBI. Jo intaccounts 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 beoperated as either savings, current, recurring or fixed deposit accounts. As for 15

 NRI BANKINGinterest rates, FCNR (B) and NRE are subject to a cap, and should not exceed theLIBOR/SWAP rates. In the case of NRO accounts, rates are determined by thebanks. 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 USD37,751 million and are expected to grow with regional rural banks also mopping upfunds. 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 AccountsFunds that can be t ransferred or repatr ia ted abroad are mainta ined in aNonResident ExternalBank account. Generally, funds remitted from outside India arecredited to this account. Investments made from foreign funds can be repatriatedoverseas, 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 IndiaSavings rate on NRE accounts is at par with savings rates in resident accountsTerm deposits can be made for 1 to 3 years.The interest rates on (NRE) Term deposits cannot be higher than LIBOR/SWAPr a t e s   a s   o n   t h e   l a s t   w o r k i n g   d a y   o f   t h e  p r e v i o u s   m o n t h ,   f o r   U S   d o l l a r   o f   corresponding maturity plus 50 basis points.The interest rates on three year deposits also apply in case the maturity periodexceeds three years. The change in in terest rate a lso appl ies to NRE deposi ts renewed after their present maturity period.

 NRI BANKINGFCNR (B) AccountsAs 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 therespective currency/corresponding term minus 25 basis points (except JapaneseYen).The term of deposits can range between 1 to5 years.NRO Accounts Only current earnings are repatriable.Savings NRO accounts  are normal ly  operated  to  credi t   rupee income  f romshares, interest, rent from property in India, etc.In case of term deposits, banks are allowed to determine their own interest rates.17

 NRI BANKINGBanks can allow remittance up to USD 1 million per financial year for bonafidepurposes from balances in the NRO accounts once taxes are paid out. This limitincludes the sale proceeds of immovable properties held by NRIs and PIOs.Resident     Foreign      Currency   (RFC)         AccountNRIs and PIOs returning to India can maintain an RFC account with an authorizedbank 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 RFCaccount . These funds are

f ree f rom al l rest r ic t ions as to thei r ut i l izat ion or in investment in any form outside India.Non-Repatriable AccountsNon-repatriable funds are those which cannot be taken out of India. These have tobe mainta ined in a separate bank account i .e . a Non Resident Ordinary Bank  account. Investments made from non-repatriable accounts cannot be repatriated buthave  to  be  maintained  in a  Non-Repatriable  Demat  account.  Money  oncetransferred from an NRE account to an NRO account cannot be transferred back toan NRE account.Non Resident Ordinary (NRO) AccountWhen a resident becomes an NRI, his existing savings account is designated as aNon-resident Rupee (NRO) account.T h e   N R O   a c c o u n t s   c o u l d   b e   m a i n t a i n e d   i n   t h e   n a t u r e   o f  c u r r e n t ,   s a v i n g , recurring or term deposits. NRIs can also open NRO accounts for depositingtheir funds from local transactions.18

 NRI BANKING

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 upemployment or business temporarily or permanently in a foreign country.Funds from NRO accounts are not repatriable or transferred to NRE accountswithout the prior approval of the RBI.However,  NRIs,  PIOs,  Foreign Nat ionals,   ret i red employees or  non-res identwidows of Indian citizens can remit, through the Authorized Dealer, up to USDone million per calendar year from the NRO account or from income from sale of assets in IndiaOPENING OF NRI ACCOUNTHOW TO OPEN NRI ACCOUNTS WITH A BRANCH IN INDIATo open an NRE account please complete theaccount opening formand mail it tothe branch of your choice along with ;Passport copyVisa/residence permit2 photographsinitial money remittanceYour signature may be verified by anyone of the following;Indian Embassy/consulateAny person known to the Bank Notary publicAny of our offices abroad19

 NRI BANKINGYou can openNRE Saving Bank a/c / Current AccountsFixed Deposits in Indian RupeesFixed Deposits in Foreign CurrencyNRO 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 AuthorityNomination Facility available (Nominee can be a resident Indian also)Procedures & Benefits:Non-Resident  accounts  can be opened along wi th  your  remit tances  throughBanking channel.Photograph shall be enclosed with the opening form.There is no ceiling on the amounts remitted for your credit in Non-Residentaccount.When the NRI depositor returns to India, the NRE account will be automaticallytreated as Resident account. However NRE term deposit will continue to earnsame 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 resident.Loans against deposits are allowed for purposes other than investment up to90% 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:Indian passport with overseas resident address or work permit (i.e. Green Card asresidence permit for USA, H1 Visa as work permit for USA or Hongkong ID cardfor residence of Hongkong)Separate proof of Non Resident status if the passport holds Indian address andresident Visa permit is not included in passport. Photograph of individual accountholder For persons employed with foreign shipping companyInitial work contractLast wage slipFor contract employeesLast work contractLetter from local agent confirming next date of joining the foreign vessel (notmore than six months from date of last return to India)Principal's overseas address or current work contract21

 NRI BANKINGIn case of documents sent by mailAll the relevant above mentioned documents / signatures to be attested by anyone of the following:Indian embassy overseas notaryLocal bank Minimum balance in which one can open an account (Differs from bank tobank):-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 EuroIf you submit the money for opening/credit to an account. Frequency of Interestpayment on accounts:NRO– Term Deposit Account – Half yearlyNRE– Savings Account – QuarterlyNRE– Term Deposit Account – Half yearly22

 NRI BANKINGFCNR – Term Deposit Account – QuarterlyOpening of JOINT ACCOUNTS:-T y p e   o f   a c c o u n t   J o i n t   A c c o u n t   w i t h Resident IndiansJoint Account withNon-Resident IndiansN R O  Y e s   Y es N R E  N o   Y es F C N R  N o   Y e s23