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NRI Banking



NRI Banking

Submitted in partial fulfillment of the requirements

for the award of the degree of

Bachelor of Business Administration (Banking and Insurance)

Under the Guidance of:- Submitted By:-

Dr.Supriya Chaudhary Harsh Mohan



Session 2015-2018



Recognized By UGC,U/S 2(F),

NAAC Accredited


C-4, Janak Puri, New Delhi-110058

NRI Banking


This is to certify that the project titled NRI Banking submitted by HARSH MOHAN to
UNIVERSITY in partial fulfillment of requirement for the award of the Bachelor of Business
Administration Degree is an original piece of work carried out under my guidance and may be
submitted for evaluation.

The assistance rendered during the study has been duly acknowledged.

No part of this work has been submitted for any other degree.

Place : New Delhi Dr. Supriya Chaudhary

Dated: Faculty Guide

NRI Banking


Any accomplishment requires the effort of many people and this work is not different.
Regardless of the source, I wish to express my gratitude to those who may have contributed to
this work, even though anonymously.

First I would like to express my deepest sense of gratitude to MAHARJA SURAJMAL

INSTITUTE for providing me with an opportunity for training and encouragement in conducting
the research work.

I would like to pay my sincere thanks to my project guide, Dr. Supriya Chaudhary under
whose guidance I was able to complete my project successfully. I have been fortunate enough to
get all the support, encouragement and guidance from her needed to explore, think new and

My final thank goes out to my parents, family members, teachers and friends who encouraged
me countless times to persevere through this entire process.


NRI Banking

Chapter TOPIC NAME Page No.

01 Introduction 07

Objectives of the study 08

Research Methodology 09

Scope 10

Limitations 11

02 NRI banking- An Introduction 13

Who is an NRI? 14

PIO card scheme 15

Types of accounts 16

Opening of NRI A/c 20

03 Literature of NRI Banking 23

Definition of NRI under Foreign Exchange 24

Management Act,1999

FEMA Definition 24

NRE Account 28

FCNR (B) Account 31

NRO Account 32

Income Tax 36

Services offered by various bank to NRIs

NRI Banking

Services offered by ICICI Bank 38

RBI issues Guidelines for money transfer scheme 41

NRI Investments 43

PAN Cards for NRI 46

Demat Account 48

04 Analysis and Interpretation 51

Case Study on NRI Banking 52

Frequently Asked Questions

05 Conclusion and Recommendation 57

Conclusion 58

Bibliography 59

NRI Banking






NRI Banking

1.1 Introduction

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 NRIs as they are looking for convenience, speed, high yield on investments with
manageable risk, reasonable cost & quality services.

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

Banks should also extend their services by providing ATMs 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.

NRI Banking

1.2 Objective Of The Study

To get an overview of NRI BANKING SERVICES

To analyze the growth of NRI banking services
To study the innovative concepts emerging in the banking industry for NRIs
To observe the facility provided to NRI by Indian banks
To analyze the response of the NRI given to the computerization & new invention in an
Indian banks.

NRI Banking

1.3 Research Methodology

In order to conduct the research an appropriate methodology became necessary. In this direction
both primary as well as secondary data were attempted to be collected. The methodology for
collecting data with reference to the secondary data was taken from the different published
articles, books, journals, and the relevant websites. The library of the college was of great help.
The questionnaire was initially prepared in tough sketch at the first instance. These questions
were discussed with our internal guides and our teaching faculty. They have provided valuable
suggestions, additions deletions and modification of the rough questionnaire Methodology
became a preplanned strategy in collecting, editing, tabulating and in interpreting the required
information for the research. Thus methodology relied on both primary and secondary data with
the help of questionnaires, discussions, observations as well as published work and unpublished

NRI Banking


The scope of the study is to extend the knowledge about the NRI banking services provided by
banks but restricted to only ICICI Bank.

AREA :- In the vicinity of New Delhi (India) services for NRI by banks
BRANCH:- ICICI (Industrial Credit and Investment Corporation of India) Bank, Nirman
TIME FRAME: - OCT 20th 2016 TO NOV 10th 2016

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1.5 Limitations

Nobody should underplay the risks associated with excessive exposure to one source of
financing be it commercial borrowing or NRI deposits, says AK Bhattacharya.

How critical have non-resident Indians or NRIs

become to the Indian economy? An answer to
this question is in the latest external debt report
released by the Union finance ministry.
At the end of March 2014, NRI deposits (there
are now three types of deposits and all of them
have a locking period of over a year and hence
are not classified as short-term debt) in the
country were estimated at $104 billion.
Just three years ago, at the end of March 2011,
NRI deposits were only $52 billion, half of what they are today. They rose to $59 billion a year
later and to $71 billion by the end of March 2013. The sharpest increase in these deposits
occurred in 2013-14. The finance ministry's report attributes this rise to the mobilisation of fresh
foreign currency nonresident (bank) or FCNR(B) deposits by commercial banks under the
special swap scheme offered by the Reserve Bank of India during September-November 2013 a
move that helped shore up the rupee and build India's foreign exchange reserves.
A consequence of this successful strategy was the increase in the importance of NRI deposits.
For instance, NRI deposits now account for almost a quarter of India's total external debt,
standing next only to external commercial borrowings, which have the largest share at about a
third of India's total external debt of $441 billion. Between 2011 and 2013, NRI deposits' share
in total external debt hovered around 1617 per cent, showing once again how the spurt took place
in one year. The rising importance of NRI deposits gets reinforced even more emphatically when
you look at these numbers from a different perspective. For instance, in 2011-12, the share of
NRI deposits in the country's total net capital flows was 17.6 per cent and came down marginally
to 16.6 per cent the following year. But in 2013-14, it went up dramatically to 79.7 per cent. The
debt flows are used largely to meet the current account deficit and their use increases during a

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period of crisis when other sources of financing like the foreign institutional investments tend to
dry up a bit.
That is also why in 2008-09, the share of NRI deposits in India's net capital flows went up to
But it is important to note that India's reliance on NRI deposits has been on the rise, particularly
in crisis years, even as the share of external assistance in total capital flows has come down to a
trickle at around one to three per cent in the last three years.
There are, of course, many good reasons for NRIs to park their money in India in the three
schemes that are now in operation.
Clearly, they earn a little more from these deposits than they can hope to get in developed
economies, where such schemes will earn them much less.
Such deposits are also a reflection of their confidence in the Indian economy, its growth potential
and financial system, where their money is not only safe but can also get good returns.

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NRI Banking An Introduction

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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.

2.1 Who Is A NonResident Indian [NRI]?

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.

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2.2 PIO Card Scheme

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

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

He/she or either of his/her parents or grandparents or great grandparents was 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)

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

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done within a period of 30 days of the expiry of 180 days;

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 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
However, they shall not enjoy political rights in India.

2.3 Types of accounts

Types of


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
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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.

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 2015-2016, as per RBI statistics, are USD 9,518 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.

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

1. Non-Resident (External) Rupee (NRE)


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.

2. 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 Yen).
The term of deposits can range between 1 to5 years.

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3. 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.

4. 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 a NRE account.

1. 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.
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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

2.4 Opening of NRI Account


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
2 photographs
Initial money remittance

Your signature may be verified by anyone of the


Indian Embassy/consulate
Any person known to the Bank
Notary public
Any of our offices abroad

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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
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 account.
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 resident.
Loans against deposits are allowed for purposes other than investment up to 90% of the
The income from deposit is free from Indian Income Tax.

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

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

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

NRO Term Deposit Account Half yearly

NRE Savings Account Quarterly

NRE Term Deposit Account Half yearly

FCNR Term Deposit Account Quarterly

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Type of account Joint Account with Joint Account with Non-

Resident Indians Resident Indians
NRO Yes Yes
NRE No Yes

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Literature of NRI Banking

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3.1 Definition of an NRI under Foreign Exchange Management Act,


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.

3.2 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

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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

(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(V) "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 under FEMA
and accordingly be eligible for foreign investments and NRE/FCNR a/cs
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.

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Person of Indian Origin:

F.E.M.A. (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,
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,

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 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.

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:

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

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3.3 Non-Resident (External) Account - NRE Account Eligibility

Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can open and maintain NRE
accounts with authorized dealers and with banks (including co-operative banks) authorized by
the Reserve Bank of India (RBI) to maintain such accounts.

The account has to be opened by the Non Resident account holder himself and not by the holder
of the power of attorney in India.

Opening NRE accounts in the names of individuals/entities of Bangladesh/Pakistan

nationality/ownership requires approval of RBI

Types of Accounts - Savings, Current, Recurring or Fixed Deposit accounts.

Debits & Credits:

Payments for local expenses and 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.

Permitted Credits

Proceeds of remittances to India can be in any permitted currency.

Proceeds of personal cheques drawn by the account holder on his foreign currency account
and of travelers cheques, bank drafts payable in any permitted currency including instruments
expressed in Indian rupees for which reimbursement will be received in foreign currency,
deposited by the account holder in person during his temporary visit to India provided the
authorized dealer/bank is satisfied that the account holder is still resident outside India, the
travelers cheques/drafts are standing/endorsed in the name of the account holder and in the
case of travelers cheques, and they were issued outside India.
Proceeds of foreign currency/bank notes tendered by account holder during his temporary
visit to India, provided
(i) the amount was declared on a Currency Declaration Form (CDF), where applicable, and
(ii) the notes are tendered to the authorized dealer in person by the account holder himself and
the authorized dealer is satisfied that account holder is a person resident outside India.
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Permitted Debits

Local disbursements
Remittances outside India
Transfer to NRE/FCNR accounts of the account holder or any other person eligible to maintain
such account.
Investment in shares/securities/commercial paper of an Indian company or for purchase of
immovable property in India within prescribed regulations.
Any other transaction if covered under general or special permission granted by the Reserve

Rate of Interest - As per the directives of the Reserve Bank of India.

Loans against Security of Funds held in the Account

To the account holder

i) For personal purposes or for carrying on business activities (except agricultural/plantation

activities/investment in real estate business).
ii) For making direct investment in India on non-repatriation basis.
iii) For acquisition of flat/house in India for his own residential use.
In January 2007, the RBI imposed a restriction on loans against deposits and securities for NRIs
to a maximum of up to Rs. 20 lakh

To third parties
The loan should be utilized for personal purposes or for carrying on business activities (other
than agricultural/plantation activities/real estate business). The loan should not be utilized for

Loans outside India

Authorized dealers may allow their overseas branches/correspondents to grant fund based
and/or non-fund based facilities to Non Resident depositors against the security of funds held
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in the NRE accounts and also agree to remittance of funds from India if necessary, for
liquidation of debts.

Change of Resident Status of Account Holder

NRE Accounts should be re designated as resident account or the funds held in these accounts
may be transferred to the Resident Foreign Currency (RFC) Accounts (if the account holder is
eligible for maintaining RFC Account) at the option of the account holder immediately upon
the return of the account holder to India (except where the account holder is on a short visit to

Repatriation of funds to Non Resident Nominee can be permitted by the authorized dealer or
bank in the case of an account holder who is deceased.

Other Features -

Joint Accounts - in the names of two or more Non Resident individuals may be opened
provided all the account holders are persons of Indian nationality or origin. When one of the
joint holder become residents, the authorized dealer may either delete his name or allow the
account to continue as NRE account or redesignate the account as resident account at the
option of the account holders. Opening of these accounts by a Non Resident jointly with a
resident is not permissible.
An Account may be opened in the name of eligible NRI during his temporary visit to India.
Operation by Power of Attorney - Resident Power of Attorney holder can operate on the NRE
accounts but only for local payments to be made on behalf of the account holder. The Power
of Attorney (POA) holder cannot credit proceeds of foreign currency notes/bank notes and
travellers cheques to the NRE accounts.
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 POA holder is permitted to operate the
account to facilitate such investments. POA holders cannot, however, make gifts from NRE

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3.4 Foreign Currency (Non-Resident Indians) FCNR (B) Account

Eligibility to Open and Maintain FCNR A/c

With the exception of persons of Indian origin from Bangladesh and Pakistan, all NRIs and
PIOs are eligible to maintain an FCNR account with an authorised bank in India.
Accounts may be opened with funds remitted from outside, existing NRE/ FCNR accounts,
Remittances should be in the designated currency.
Conversion to currency other than the designated currency also permitted at the risk and cost
of the remitter.

Features of FCNR Account

The account can be opened with funds remitted from abroad, or transferred from an existing
NRE/FCNR account.
FCNR accounts can be opened with designated currencies, which are: GBP, USD, Deutsche
Mark, Japanese Yen and the Euro.
Conversion to another designated currency is permitted at a cost to the account holder.
Only term deposits can be maintained in FCNR accounts, in a time range of 6 months to 3
As per RBI guidelines, banks are free to offer interest on FCNR deposits below LIBOR rates,
less 25 basis points for deposits between 6 months to one year, and LIBOR rates plus 50 basis
points for deposits over a year.
Banks are also free to decide on a fixed or a floating rate of interest on FCNR term deposits.
Interest rates are reviewed periodically and determined by directives from the Reserve Bank
(Department of Banking Operations and Development).

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3.5 Non-Resident Ordinary Rupee (NRO) Account


Any person or entity residing outside India is entitled to open a NRO account with an
authorised dealer or an authorised bank for transactions conducted in Indian Rupees.
Individuals or entities of Bangladeshi or Pakistani nationality or ownership require approval
from the RBI.

Types of Accounts
NRO accounts can be opened as current, savings, recurring or fixed deposit accounts. The RBI
determines the rate of interest on these accounts and issues guidelines for opening, operating and
maintaining them.

Joint Accounts with Residents/Non-residents

Joint accounts are permitted with resident and non-residents.

Permissible Credits/Debits -
Credits -

Remittances from outside India through normal banking channels received in freely
convertible foreign currency.
Any freely convertible foreign currency can be deposited into the account during the account
holder's visit to India. Foreign currency exceeding USD 5000/- or its equivalent in the form of
cash has to be supported by a Currency Declaration Form. Rupee funds must be supported by
an Encashment Certificate, if they are funds brought from outside India.
Current income earned in India, such as rent, dividend, pension or interest. Even proceeds
from sale of assets including immovable property acquired out of rupee or foreign currency
funds or through inheritance.

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Debits -

All payments towards expenses and investments in India

Payment outside India of current income like rent, dividend, pension, interest etc. in India of
the account holder.
Repatriation up to USD One million, per calendar year, for all bonafide purposes with the
approval of the authorised dealer.

Remittance of Assets
NRIs and PIO may remit upto USD One million per calendar year, out of balances held in the
NRO account which could be acquired from the sale proceeds of assets acquired in India out of
rupee or foreign currency funds or by way of inheritance from a resident Indian, provided:

1.Assets acquired in India out of rupee/foreign currency funds

(a) Immovable property: NRIs and PIO may remit sale proceeds of immovable property
purchased by them when they were resident or out of Rupee funds as NRI or PIO.
(b) Other financial assets: There is no lock-in period for remittance of sale proceeds of
other financial assets
2.Assets acquired by way of inheritance:
Sale proceeds of assets acquired through inheritance can be remitted. No lock-in period
applies here if the authorised dealer is satisfied that the proceeds are from inherited

Remittance of assets out of NRO account by a person resident outside India

other than NRI/PIO

A foreign national who is not a citizen of Pakistan, Bangladesh, Nepal or Bhutan and who

has retired as an employee in India,

has inherited assets from a resident Indian, or
is a widow residing outside India and has inherited assets of her deceased husband who was a
resident Indian can remit upto USD one million per calendar year on production of
documentary evidence to support the acquisition by way of inheritance or legacy of assets to

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the authorised dealer.

The above facility of repatriation from sale of immovable property is not extended to citizens of
Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan. Remittance of
sale proceeds from other financial assets is not extended to citizens of Pakistan, Bangladesh,
Nepal and Bhutan.

Foreign Nationals of non-Indian origin on a visit to India

Foreign nationals of non-Indian origin are permitted to open a NRO account (current/savings) on
their visit to India with funds remitted from outside India through normal banking channels or by
foreign exchange brought to India. The balance in the NRO account is converted by the bank
into foreign currency for payment to the account holder when he leaves India, provided the
account was maintained for less than six months. The account should not be credited with any
local funds during the term, except for interest accrued on it.

Grant of Loans/ Overdrafts by Authorized Dealers/ Bank to Account Holders

and Third parties
Loans to NRI account holders and to third parties is granted in Indian Rupees by authorized
dealers (banks) against the security of fixed deposits provided:

The loans are utilized only for meeting the borrower's personal requirements or for business
and not for agricultural/plantation /real estate or relending activities
RBI regulations pertaining to margin and rate of interest will apply
All norms and considerations which apply to loans to trade and industry will apply to loans
and facilities granted to third parties.

The authorized dealer/bank may allow an overdraft to the account holder subject to his
commercial discretion and compliance with the interest rate directives.

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Change of Resident Status of Account holder -

(a) From Resident to Non-resident

When a resident Indian leaves India for taking up employment or for carrying on business
outside India, his existing account is designated as a Non-Resident (Ordinary) Account, except in
the case of persons shifting to Bhutan and Nepal. For the latter, the resident accounts do not
change to NRO accounts.

(b) From Non-Resident to Resident

NRO accounts may be re-designated as resident rupee accounts once the account holder returns
to India for taking up employment, or for carrying on business or for any other purpose
indicating his objective to stay in India for an uncertain period. Where the account holder is only
on a temporary visit to India, the account continues to be treated as non-resident during the visit.

Treatment of Loans/ Overdrafts in the Event of Change in the Resident Status

of the Borrower

In case of a resident Indian who had availed of loan or overdraft facilities while resident in India
and who subsequently becomes a NRI, the authorized dealer may at its discretion allow the loan
facility to continue. In this case, payment of interest and repayment of loan may be made by
inward remittance or out of bonafide resources in India.

Payment of funds to Non-resident/Resident Nominee

The amount payable to a non-resident nominee from the NRO account of a deceased account
holder is credited to the NRO account of the nominee.

Facilities to a person going abroad for studies

Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for

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all the facilities enjoyed by NRIs. All loans availed of by them as residents in India will continue
to be extended as per FEMA regulations.

International Credit Cards

Authorized dealers are allowed to issue International Credit Cards to NRIs and PIO, without the
permission of the RBI. Such transactions can be made by inward remittance or out of balances
held in the cardholder's FCNR/NRE/NRO Accounts.

3.6 Income Tax

The remittances, after payment of tax are allowed to be made by the authorized dealers on
production of a statement by the remitter and a Certificate from a Chartered Accountant in the
formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, and Government
of India


Interest on NRE & FCNR deposits are free of income tax.

Tax @ 30% will be deducted at source on all interest income in NRO accounts.
On permanent return to India, income on all investments out of foreign exchange funds would
be eligible for a flat tax rate of 20% (excluding surcharge) till maturity of the investments.

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3.7 Services Offered by Various Bank to NRIs


NRI banking services including deposits, savings accounts, finance like home loans, personal
loans etc. Various banks like ICICI Bank, Citibank, HDFC Bank and many other nationalized
and private banks that hold authorized dealer's licenses from the Reserve Bank of India (RBI)
provide remittances, savings, earnings, investments and repatriation services.
Besides the major commercial banks, certain cooperative and regional rural banks (RRB's) have
also been specifically permitted to maintain NRI accounts. This would increase NRI remittances
in Bihar, Kerala, U.P. and Gujarat where a large chunk of the rural population have settled

The banks also offer finance services to the NRI's that cover home loans for buying new
residential property, housing renovation loans for constructing or modifying on the existing
properties, personal loans and other loan products.

Another FDI (Foreign Direct Investment) magnet has been the various money transfer services
provided. Various banks provide quick, convenient and economical fund remit to India. These

Online remittance services

Remittance of funds to partner exchange houses in India

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Telegraphic or wire transfer

Fund transfer through cheques/ DD's and Travelers' cheques.

Many banks also offer Demat account services to the NRI's that enable NRI's online stock
investment and share trading services. Special NRI credit cards acceptable globally are available
with various banks. These specialized services and banking accounts have drawn enormous NRI
funds to India.

3.8 Service offered by ICICI


Rupee plus plan :- At ICICI Bank, we believe in

providing you with the most competitive returns
on your hard earned money. Now you can earn
even higher returns on your deposits by investing
in Rupee plus plan.

What does the Rupee plus plan offer you :- NRE-FD interest rates rate being regulated by
RBI, is nearly same across banks. In Rupee plus plan we have devised a way to make your
money work harder and smarter and earn higher returns in terms of NRI as compared to a NRE

Currencies :- You can keep funds in any convertible currency, which will be converted to USD
(if not in USD already).

Minimum Deposit: - USD 25,000 or equivalent.

Tenor: - for 1 year only.

How does the Rupee plus plan work? Instead of putting the money in NRE FD directly, the
money is put in USD denominated FCNR. This FCNR earns interest as per prevailing FCNR
interest rates.

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Additionally, at the time of booking the FCNR a Forward Agreement is also drawn to exchange
the maturity amount of USD to Rupees at a given rate (Forward Rate).

Rupee plus plan advantage: - on an average the returns are significantly higher compared to
putting your money in NRE FD as per the prevailing market rates. Returns in rupee terms are
assured once the deal is booked irrespective of the future movements in currency markets.

The following banking facilities are available to NRIs, as per the current
RBI/FEMA guidelines.

Foreign Currency Non-Resident

(Non-Resident) (External) Rupee
Ordinary Rupee
Particulars Account (Banks) Account
Account Scheme(NRO
Scheme(FCNR(B) Scheme(NRE
Account) Account)
Who can open an NRIs/PIOs NRIs/PIOs Any person resident
account outside India (other
than a person resident
in Nepal and Bhutan)
Joint account In the names of two or In the names of two May be held jointly
NRIs or more NRIs with residents

Nomination Permitted Permitted Permitted

Currency in which Pound Sterling, US Indian Rupees Indian Rupees

account Dollar, Jap. Yen or
is denominated Euro. Australian Dollar,
Canadian Dollar

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Repatriability Repatriable Repatriable Non-repatriable*

Type of Account Term Deposit only Savings, Current, Savings, Current,

Recurring, Fixed Recurring, Fixed
Deposit Deposit
Rate of Interest Subject to cap: LIBOR Rate of interest on Rate of interest on
minus 25 basis points domestic savings domestic savings
except in case of account will also be account will also be
Japanese Yen where the applicable to NRE applicable to NRO
cap would be based on savings account. For savings account. For
at the prevailing Fixed Deposits, the Fixed Deposits, the
LIBOR rates rates can be fixed by rates can be fixed by
banks subject to banks subject to
ceilings prescribed by ceilings prescribed by

Tax Aspects Interest income tax free Interest income tax Interest income taxable
and no tax deduction at free and no tax and liable for TDS
source. deduction at source. @30% plus applicable
surcharge subject to
conditions. DTAA
benefit may be
available subject to
fulfillment of

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3.9 RBI issues guidelines for money transfer scheme


Money can be transferred either through on line or drafts or telegraphically or by wire transfer or
Cheques. E-Transfer is completely online, paperless money transfer service which enables the
customer to send money directly from one bank account in foreign country to India. Drafts in
Indian rupees can be purchased from exchange companies of one country and mailed to the
branch of another country where the customer has the account. Telegraphic or wire transfers can
be made through branch to branch. Cheques can be deposited for credit of the customers
accounts and the Cheques will be collected and credited to their accounts.

Western Union Money Transfer

Western Union is a global leader in money transfer services, with a history of pioneering dating
back more than 150 years. Non-resident Indians can now transfer their funds to India through the
Money Transfer Service offered by Western Union. This service is currently available for inward
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remittances in India.
"Credits to NRE/FCNR accounts are not permitted to be routed through Money Transfer Service
Scheme (MTSS)"


A rupee demand draft delivered to the recipients doorstep within three to four working days and
can be encashed at any nationalized bank in India.

MONEYGRAM Send money online today:-

You can send money around the world online to over 84,000 moneygram agent locations, in
more than 170 countries. Not only is sending money with moneygram safe and convenient,
youll find the same day services to be one fastest way to send your money online-usually
arriving within minutes. Send money online or at a moneygram agent location near you.
Moneygram is a global leader in international money transfers and the largest processor of
money orders in the U.S. We help people and business by providing affordable, reliable and
convenient payment services.

ICICI Bank NRI Money Transfer:-

ICICI Bank, the leading bank in India offering financial services to the NRI community through
NRI saving account, NRE Accounts, Fixed Deposit, FCNR deposits, and the quickest way to
send money online to India.

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3.10 NRI Investments

The Government of India has adopted a liberal policy, with respect to investment by NRIs and
OCBs in India, such investment are allowed, both, through the RBI route and also through the
Government route, i.e., through the Foreign Investment Promotion Board (FIPB) NRIs and
OCBs are permitted to invest up to 100% equity in real estate development activity and civil
aviation sectors. Investment, made by the NRIs and OCBs, are fully repatriable, except in the
case of real estate, which has a 3 year lock-in period on original investment and, 16% cap on
dividend repatriation.

Various investment opportunities in India available to NRIs:-

If one is NRI, the following investment opportunities are open to you:

Maintenance of bank accounts in India.
Investment in securities/shares and deposits of Indian firms/companies.
Investment in mutual funds in India.

Investment Policy for Non-resident Indians (NRIs):-

Recognizing the investment potential of the Non-resident Indians, a number of steps are being
taken by the government on an ongoing basis to attract from them in Indian companies. Some of

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the investment schemes presently available to Non-resident Indians (NRIs) include the facility to
invest upto 100 percent equity with full benefits of repatriation of capital invested and income
accruing thereon in high priority industries mentioned in the Annexure-III to the industrial policy
1991, 100 percent export oriented units, sick units under revival, housing and real estate
development companies, etc,. NRIs/PIOs/OCBs are also permitted to make portfolio investments
through secondary markets. In terms of the relaxations announced in 1998-99, investment limits
for an individual NRI has been revised upwards from 1% to 5%, aggregate portfolio investment
limits by all NRIs increased from 55 to 10% of the issued and paid-up capital of the company.
The aggregate investment limit would be separate and exclusive of FII portfolio investment

For NRI Investment:-

In order to help the tax-payers to plan their Income-tax affairs well in advance and to avoid long
drawn and expensive litigation, a scheme of Advance Rulings has been introduced under the
Income-Tax Act, 1961. Authority for advance rulings has been constituted. The tax-payer can
obtain a binding ruling from the Authority on issues which could arise in the determination of his
tax liability. A non-resident or certain categories of resident can obtain binding rulings from the
Authority on any question of law or fact arising out of any transaction/proposed transactions
which are relevant for the determination of this tax liability.

Portfolio Investment

NRIs/OCBs are permitted to make portfolio investment in shares/debentures (convertible and

non-convertible) of Indian companies, with or without repatriation benefit provided the purchase
is made through a stock exchange and also through designated branch of an authorized dealer.
NRIs/OCBs are required to designate only one branch authorized by Reserve Bank for this

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NRIs Interest:-

NRIs invested only 5% of their investible assets in India with the balance being parked overseas.
A major reason for this was that the Indian banking system was not a very preferred and trusted
mode of investment for the NRI. The customer was looking for convenience, speed, high yield
on investment with manageable risks, reasonable costs and quality services A face of India he
could associate with. Competition was not only from India based banks, but also from local
banks based overseas; conventional and non conventional routes of money transfer.

Facilitation Agencies

The main regulatory and facilitation agencies involved in the matters related to NRIs/OCBs
investment are Reserve Bank of India (RBI), Securities and Exchange Board of India (SWBI),
Authority for Advance Rulings (AAR), Secretariat for Industrial Assistance (SIA), Ministry of
Commerce and Industry; and Office of the Chief Commissioner (Investments & NRIs).

RBI Forms

NRIs/OCBs/PIOs do not have to seek specific permission for approved activities covered under
General permission schemes. The activities relating to NRIs/OCBs/PIOs not covered under
those schemes either require declaration to RBI or permission from RBI. The activities requiring
Declaration/Permission along with corresponding forms are as under;

TS 1 Transfer of Shares/Debentures by Non-residents to Residents

FNC 1 Permission to establish a branch office in India by an Overseas Company establishing

a Representative Office by Overseas Company for Liaison Activities to open a
Project/Site Office in India.

IPI Company/Individual (declaration) acquiring property

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3.11 PAN Card for NRIs

For all Indian citizens who are liable to pay tax under the Income Tax Act, 1961, or are required
to enter into financial transactions in India, it is mandatory to have a Permanent Account

The Permanent Account Number (PAN) is a combination of 10 alphanumeric numbers issued by

the Income Tax Department. The Department has entrusted UTI Investor Services Ltd. (UTIISL)
with the task of managing IT PAN Service Centers wherever the IT department has an office in
the country. The National Securities Depository Limited (NSDL) has also been engaged to allot
PAN cards from TIN Facilitation centers.

Applying for a PAN

Form 49A, which is the application form for a PAN, can be downloaded from the Income Tax,
UTIISL and NDSL websites:
www.incometaxindia.gov.in & www.utiisl.co.intin.nsdl.com
The forms care also available at the IT PAN Service Centers and TIN Facilitation Centers. A
tatkal or priority service has been provided for, to enable speedy allotment of the PAN card
through the Internet. The PAN is allotted through e-mail on priority in 5 days as against the
normal 15 days to the applicant upon online payment through a credit card. The PAN has
lifetime validity.

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The necessity for a PAN Card to NRIs

Apart from income returns which must carry the PAN, it is mandatory to submit the PAN in all
financial transactions, like the purchase and sale of property in India, payments for purchase of
vehicles, foreign visits, securing a telephone connection or making time deposits in a bank
worth over Rs.50,000.

For NRIs, PAN is necessary to conduct monetary transactions in India, invest in stocks, and pay
tax on their Indian income.

The application for a PAN must be accompanied by:

A recent colored photograph of size 3.5 cms x 2.5 cms on the application form.
A proof of residence and identity (attested school leaving/matriculation
certificate/degree/credit card/voter identity/ration/passport/driving
license/telephone/electricity bill/employer certificate.
Code of the concerned Assessing Officer of the IT Department obtainable from the IT office
where form is submitted.

3.12 DEMAT Account :-

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A demat account facilitates buying and selling shares, precluding cumbersome paperwork and
meaningless delays.

Advantages of a Demat Account -

It is a safe, secure and convenient mode of transacting in shares.

Minimizes brokerage charges
Ensures immediate liquidity
Removes uncertainty on ownership title of securities
Allows quick allotment of public issues
Enables smooth process in pledging shares
Avoids delays due to wrong/incorrect signatures, post, and misplacement of certificates
Prevents risks like forgery and counterfeit, theft or damage to documents
Saves on stamp duty, paperwork on transfer deeds
Gives immediate benefits from bonus shares and stock splits

Who offers Demat Facility?

Depository Participants or DPs offer demat account services, which would include banks.
Holding a demat account with a bank enables quick on-line dealings, ensuring credit of a
transaction to the account holders savings account by the third day. Banks have an added
advantage over other DPs with their large network of branches.

How to Open a Demat Account in India

Fill up the demat account opening form at the nearest Depository Participant
You may refer to either

CDSLathttp://www.cdslindia.com/demat_acct/open_demat.jsp or
NSDLathttps://nsdl.co.in/for the list of DPs in India.

Joint demat accounts can be opened, retaining the same order of names
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Separate demat accounts have to be opened for different combinations of names in the case of
three or more joint holders.
Any number of demat accounts and DPs are permitted
A multiple-sign demat is feasible, operated by several holders
DPs charge a fee for switching shares from electronic to physical form and vice-versa, which
varies from a flat fee to a variable fee. Remat and demat charges may also show a discrepancy
between DPs.
Some DPs offer a discount to frequent traders.
It is advisable to maintain all demat accounts with the same DP to keep track of capital gains
liabilities. Different DPs follow dissimilar methods of computing the capital gains, which is
determined by the period of holding.
The charges on a demat account vary between DPs. Broadly, they are: account opening fee,
an annual folio maintenance charge paid in advance, a monthly custodian fee, and a charge on
transactions, which may either be charged every month or as a flat fee per transaction, and its
nature. Some DPs may skip the account opening fee but charge a re-opening fee for the
account. Account holders are also subject to a service tax.
No opening balance is required for a demat account.

NRI Demat Accounts

NRIs need to fill in NRI in the type and repatriable or non-repatriable in the sub-type on
the form. No special permission from the RBI is required by NRIs to open a demat account,
though specific cases may require authorization from the designated authorised dealers.

NRIs require separate demat accounts for securities under the foreign direct investment (FDI)
scheme, which is repatriable; and the Portfolio Investment Scheme and Scheme for Investment
which can be either repatriable or non-repatriable. Repatriable and non-repatriable securities
cannot be held in a single Demat account.

Resident Indians can continue to hold non-repatriable demat accounts they hold even after they
acquire non-resident Indian status. However, when a NRI returns to India permanently, he
must inform his designated authorised dealer of his new status, and a fresh account would have
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to be opened. The securities held in the NRI Demat account would have to be transferred to the
new resident demat account, and the NRI Demat account closed. The Demat account would have
to be linked with the NRIs NRO account for non-repatriable accounts and NRE accounts for
repatriable accounts to credit dividends and interest.

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Analysis and Interpretation

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Increasingly at Personal we are meeting Indians living abroad who are relocating to India.
Usually such individuals have a significant portion of their assets in the foreign country;
investments in India are usually linked to inheritance or savings made before shifting abroad

The task we are entrusted with is to help such individuals plan their finances. Here's how we
assisted one such family.

We recently met a Person of Indian Origin (PIO) who was based in the United States (US); he
has now shifted permanently to India. Let's call this individual Rajeev.

Almost all of Rajeev's savings are in the US; in US mutual funds and bonds. He has no exposure
to India in his asset allocation, although he does expect to inherit some Indian assets over time.

Rajeev's investment details are as follows:

His combined investment in stocks and funds in the US accounts for 50% of his net assets.
Remaining 50% of his investments are in short-term deposits, again in the US. Important to note
that he does not own any residential property, either in the US or in India.

As mentioned earlier, since the client is now settled in India, and is certain to be here for the rest
of his life, in our view, it makes sense to shift his assets back to India. Why do we say that?
Well, if you know you are going to be in India, and all your future incomes and expenses are
going to be in Indian Rupees, why take on the risk of being invested in US Dollars? In case the
US Dollar were to depreciate vis-a-vis the Rupee, the value of your US assets would effectively
erode. This is not to say that no one should have money invested in other currency assets. From
our perspective, one should evaluate such investment opportunities only when one has completed
their investment plans for domestic assets. Importantly, you should have that much money in
another currency asset that is required to meet future needs (that need to be provided for in the
other currency).

In order to reallocate his assets, Rajeev will need to liquidate his assets in the US and transfer the
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proceeds to India. Since his daughter might go back to US for higher education in future he will
require money (US Dollars) at that point of time. Therefore, in his case, the liquidation and then
allocation of assets must be based on his needs in India as well as in the US.

Keeping this in mind we proposed to conduct his entire financial planning exercise in two
phases. The first phase involved understanding of his needs in India and the US and accordingly
liquidating his investments. The second phase involved, investing the proceeds in India.

Liquidation process:

We first started with liquidation of his investments in US, and for this, demarcating his needs in
India and US became the starting point for us. Since the client has no prior investments in India,
it gave us a good opportunity to define a well-diversified portfolio for him.

The next step was to decide the quantum of investment to be liquidated based on his needs. In
US, he has to continue with some of his investments for his daughter's future education. We
found that around 10% of the client's total wealth will be sufficient for this purpose and rest he
can liquidate. Thus, we advised him to liquidate 90% of his total investments in US.

The next step was to transfer the proceeds to India. Normally, people who have foreign currency
(in this case US Dollar) get apprehensive about the exchange rate at which their proceeds are to
be transferred. In this particular case, since the client is already settled in India, we advised him
not to pay much heed to the exchange rate and instead start transferring the funds.

Asset allocation based on the client's needs in India:

Given that the client has no investment in property (he was living in a rented premise), the top
priority was to invest in a property. About 40% of his assets were allocated for the purpose.
Given the hype about property, Sanjeev was keen to consider a higher exposure; however we
recommended otherwise. In our view, and this holds true for most individuals, the number of
properties you own should be linked to your 'real' needs i.e. property which you need to give as
inheritance or property for self-use.

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The fact that the client is financially very sound and in a position to take some risk, we
recommended that he invest upto 35% of the surplus in well-managed diversified equity funds in
a disciplined manner based on his needs and objectives. The portfolio consisted of no more than
six schemes.

Equities as an asset class are best equipped to generate high returns over longer time frames (3-5
years). Thus, his investment in equities should be well equipped to cater his future needs such as
his daughter's marriage, his retirement planning or any other need as and when required.

Another 10% of the surplus cash inflows could be invested in debt funds (short-term debt funds,
as at present interest rates are on the rise). Inclusion of debt funds in the portfolio will ensure that
the portfolio becomes well diversified across asset classes.

The balance (5%) could be maintained in liquid assets for any immediate requirement or for
contingency. Rajeev was also advised to take up a term insurance policy for himself. This is a
pure risk cover plan that enables the individual to opt for a high insurance cover at relatively
lower premiums.

It goes without saying that our recommendation to Rajeev (although very critical) was just a
starting point. First and foremost, it needs to be executed (investing in mutual funds, buying
property) and then the plan needs to be monitored regularly. This is necessary as over time,
Rajeev's risk profile will change, as he gets older, he may not be comfortable with a higher
allocation to equity, so a portion of his money will have to be shifted to lower risk assets. Also
the performance of the mutual fund schemes will have to be monitored. Given the nature of the
task, it is best for Rajeev that he engages the services of a professional and competent financial
planner who can actively monitor his financial plan.

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4.2 Frequently Asked Questions

Findings & Suggestions:-
Q. Can I break my deposit before the maturity period?

A. Yes. Deposits can be broken before the maturity period but the interest payable would be the
applicable interest rate prevailing for that period at the time of opening the deposit. The
minimum period for NRE and FCNR would be 1 year. A penalty charge as applicable will be

Q. If I am visiting India, can I use travelers cheques or currency to open an account or credit
my existing NRE Account?

A. Travelers cheques can be used to credit/open the account. If you are bringing foreign
currency notes & travelers cheques, you will have to submit a Currency Declaration Form
(CDF) to the Customs authorities on arrival in India if the foreign currency notes exceed USD
5,000 or travelers cheques and notes exceed USD 10,000. You must produce the CDF for
endorsement by the bank when you submit the money for opening/credit to an account.

Q. Can any person in India be authorised to operate the NRI's account?

A. Yes. The mandate facility is available for NRI customers. The mandate form duly completed
(with Form 60 or PAN card, proof of identity, proof of address, and photo) may be handed over
to the branch when the account is opened to authorise a person in India to operate the account.
This is possible only in the case of savings accounts.

Q. Can an FCNR deposit in one currency be converted to a deposit in another currency?

A. Yes. However, you may consider doing so only on maturity of the deposit so that there is no
loss of interest.

Q. Can FCNR/NRE deposits be value dated?

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A. Deposits are value dated. The date will be the date on which the funds are received by
Barclays (India) in its Nostro accounts.

Q. How much money can an NRI remit abroad annually from his NRO accounts?

A. An NRI can remit up to USD 1 million (or equivalent) per calendar year for any bonafide
purpose subject to payment of tax and furnishing the required documents.

Q. Can an NRI repatriate sale proceeds of his property purchased by him by remittance from

A. Yes. However the amount repatriated should not exceed the amount paid for acquisition.
Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year
requires prior permission of the Reserve Bank.

Q. What is the limit on the international ATM-cum-Debit card for NRI customers?

A. The International ATM-cum-Debit card offers Rs 50,000 of cash withdrawal per day and
transactions worth Rs 50,000 at merchant establishments.

Q. What are the charges applicable for debit card?

A. There are no withdrawal charges for cash withdrawn from any VISA ATM network across the
world. For purchases and ATM transaction(s) outside India there is a 2.5% currency conversion
charge, at all VISA enabled POS and ATM machines. Service Tax (currently 12.36%) on these
charges will be levied. For details of charges on Domestic debit cards, kindly refer the schedule
of charges for Consumer banking.

Q. Can I repatriate money out of balances held in my NRO accounts?

A. Interest earnings can be repatriated. In addition to this, remittance/s up to USD 1 million per
calendar year from balances in NRO accounts subject to payment of applicable taxes is allowed.

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Conclusion and Recommendation

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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



Libraries referred

College library

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