Types of Bank Accounts an NRI Can Open in India

NRI Bank Account: It is always not easy to manage your financials from abroad especially when you need to send money to India in your bank accounts. Staying in other countries is a challenging task. People who go abroad on work VISA, usually need to send money to Indian Bank Accounts. It gets tougher if you don’t have the right information about NRI Bank Account types you can open in India.

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Being a Non-Residential Indian (NRI) or Person of Indian Origin (PIO), most of the people earn in foreign denominations like US Dollar, European Union Euro, British Sterling Pound, Japanese Yen, Australian Dollar, etc. We will see in this article about how to manage bank accounts in India working abroad and types of bank accounts an NRIs can open in India and manage financials.

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Table of Content 

1. Who is considered as NRI?
2. What is an NRI Bank Account as per RBI?
3. Types of NRI Bank Accounts in India
4. NRE Bank Account
5. NRE Bank Account Features
6. NRO Bank Account
7. NRO Bank Account Features
8. FCNR Bank Account
9. FCNR Bank Account Features
10. FCNR account rules and regulations in India

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Let’s Know who is an NRI with example and How NRI becomes Indian Resident?

As per the definition set by the Government of India, An NRI is an Indian citizen who lives outside India for 182 days or more in a financial year for employment or business. In India, NRIs need to maintain an NRI Bank account to make financial transactions as per the Foreign Exchange Management Act (FEMA) mandate. Almost all banks in India offer NRI Accounts for Non-Residential customers. 

The NRI status is changed to resident status only when their stay exceeds 182 days.

NRI Bank Account facilities and benefits designed to match the requirements of the NRI customers. An NRI can maintain an Indian Bank Account in the form of rupee or foreign currency accounts. 

There are different NRI Bank Accounts in India for different purposes. For example, an NRI needs a bank account in India to transfer money earned outside India to the domestic account or if an NRI needs to invest money in India or, to manage the money earned in India. 

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What is an NRI Bank Account as per RBI?

As per the Reserve Bank of India (RBI), An NRI Bank Account is a bank account opened by a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) with an authorized Indian bank or Indian financial institution.

Types of NRI Bank Accounts in India

Basically, there are three types of NRI Bank Accounts in India. 

1. Non-Resident (External) Rupee Account (NRE account)
2. Non-Resident (Ordinary) Rupee Account (NRO account)
3. Foreign Currency (Non-Resident) Account (FCNR account)

Let’s know in detail about NRI Bank account types in India. 

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Non-Resident (External) Rupee Account (NRE account):

An NRI can open a Non-Resident (External) Rupee Account (NRE Account) to manage the transactions in rupee. This is also referred to as a rupee-denominated bank account. An NRI can open a Savings Account, Current Account, Recurring Deposit Account, or Fixed Deposit Account to remit the funds. An NRI can give operating powers to a person reading in India to manage the NRE account.

NRI can use the NRE account for any legitimate purpose. If the NRI returns to India and becomes a resident of India he can convert the NRE account to a normal resident bank account. Interest in NRE bank accounts cannot be more than the interest on the domestic deposit accounts.

NRE Bank Account Features – 

1. The foreign currency deposited in the NRE account converts to Indian Rupee at the prevailing foreign exchange rates.
2. NRE account is opened to save money earned abroad by NRI
3. NRI can fully transfer the principal amount and the interest in NRE account.
4. The money deposited plus the interest earned on NRE deposits are non-taxable in India.
5. NRI can add any close relative (NRI or Resident Indian) as a joint account holder in NRE account. 

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Non-Resident (Ordinary) Rupee Account (NRO account):

If an NRI earns income within India he will need to open an Non-Resident (Ordinary) Rupee Account (NRO Account) to manage the money. NRO account is a Current or Savings Account which helps an NRI to manage the financials within India. 

When an Indian resident individual leaves for a foreign country for employment, the regular resident bank account converts to an NRO account. 

The NRI can manage this NRO account from outside India and use it to convert existing savings into a foreign currency. 

NRO Account Features:

1. The foreign currency deposited is converted to Indian Rupee at the prevailing foreign exchange rates.
2. NRO account is available to deposit the funds earned within India. NRI can deposit rental income, pension, dividend income, other income from property or assets etc. into the NRO Account.
3. NRI can add any close relative (NRI or Resident Indian) as a joint account holder. 

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Foreign Currency (Non-Resident) Account (FCNR account)

The FCNR Accounts are not mandatory to manage in Indian rupee. Hence FCNR bank accounts are not rupee-dominated. An NRI can transfer a freely convertible foreign currency, such as USD, Pound, Euro, Australian Dollars, etc. in FCNR accounts. 

FCNR accounts terms and conditions (NRI Bank Account restrictions)- 

1. Only an NRI can be a joint holder for the FCNR Accounts. 
2. NRI can operate FCNR accounts in perpetuity for a fixed term for maximum 5 years..
3. The time periods allowed for these accounts are as follows:
   • 1 year and above but less than 2 years
   • 2 years and above but less than 3 years
   • 3 years above but less than 4 years
   • 4 years and above but less than 5 years
   • Five years

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FCNR Account Features:

• The FCNR Account is opened and maintained in foreign currency only.
• The principal and the interest amount in an FCNR Account are transferable fully.
• The money deposited plus the interest earned on NRE deposits are non-taxable in India.
• The FCNR Account is opened for a fixed-term.

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