NRI Banking with NRE, NRO, RFC and FCNR
Have you ever wondered what types of NRI bank account options are available to you as NRI. How do you decide between NRE,
NRO, FCNR and RFC accounts? Read on to find out how these account types differ in features and restrictions.
Non Resident Indian (NRI)
NRI is any person of Indian origin who travels overseas for reasons other than the following
- tourism,
- medical check up or procedure,
- reside in Nepal, Bhutan, Bangladesh, Pakistan
- seafaring for Indian shipping company.
- or studying overseas qualifies one for NRI status.
Banks in India offer various account options on the basis of repatriability of earnings (ability to transfer funds overseas) and
deposit length.
Non Resident External (NRE)
NRE is a term assigned to savings and term deposit bank accounts available to NRIs who currently reside outside India. NRIs may
hold their overseas earnings in such accounts where balance is maintained in Indian Rupees or a major foreign currency†
and is fully repatriable. NRE accounts are subject to the following conditions
- accounts may be jointly held provided each holder has NRI status,
- a resident or NRI may be nominated as beneficiary,
- funds may be invested and proceeds from investment are entirely repatriable,
- balances (principal as well as the interest earned) are not taxable,
- on returning permanently to India, the account must be converted to an RFC or normal account.
- interest rates on NRE Savings deposits are the same as the rates applicable to domestic savings deposits. The current interest rate is 3.5%.
- for term deposits of 1 year to 3 years, the interest rates may not exceed the LIBOR/SWAP rates, as on the last working day of the previous month, for US dollar of corresponding maturity plus 50 basis points.
Non Resident Ordinary (NRO)
The term NRO refers to savings and term deposit bank accounts available to NRIs who currently reside outside India. These accounts may be used to
hold income earned in India (such as dividends, pension or rental income). NRO accounts are subject to the following conditions
- accounts may be jointly held with a resident or NRI,
- a resident or NRI may be nominated as beneficiary,
- balances are taxable,
- upto a $1,000,000 (USD one million) is available for repatriation after taxes,
- on returning permanently to India, the account must be converted to a normal account.
- interest rates on NRO Savings deposits are the same as the rates applicable to domestic savings deposits. The current interest rate is 3.5%.
- for term deposits banks are free to offer any interest rate.
Resident Foreign Currency (RFC)
The term RFC refers to a type of bank account available to returning NRIs or PIOs who wish to maintain their non-resident (NR) earnings
in foreign currency. The account may be funded with NRE/FCNR accounts, overseas transfer, cash or travellers
cheques‡. RFC accounts are subject to the following conditions
- applicant must have been a non resident for a continuous period of one year or more,
- a resident or NRI may be nominated as beneficiary,
- balances are available for overseas investments.
Foreign Currency Non Resident(FCNR)
The term FCNR refers to fixed-term deposit† accounts available to NRIs and PIOs. The account may be funded with NRE/FCNR accounts, overseas
transfer, cash or travellers cheques‡. A variety of fixed terms ranging from 1 to 5 years is
available with many banks. FCNR accounts are subject to the following conditions
- a resident or NRI may be nominated as beneficiary,
- balances are available for overseas investments.
- fixed and floating interest rate are limited to LIBOR/SWAP rates for the respective currency/corresponding term minus 25 basis points.
† Deposits can be made in US Dollar, Pound Sterling, Japanese Yen, Australian Dollar and Canadian Dollar.
‡ Amount totalling equivalent of $10,000 in foreign currency & Travellers cheques or foreign currency
over $5,000 are subject to Customs declaration upon arrival in India.
Further reading: RBI FAQ page.