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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 travellers 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 authorised dealer/bank is satisfied that the account holder is still resident outside India, the travellers' cheques/drafts are standing/endorsed in the name of the account holder and in the case of travellers' cheques, 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 authorised dealer in person by the account holder himself and the authorised dealer is satisfied that account holder is a person resident outside India.

Transfers from other NRE/FCNR Accounts
  • Interest accruing on the funds held in the account.
  • Interest on Government securities and dividend on units of mutual funds, provided the securities/units were purchased by debit to the account holder's NRE/FCNR account or out of inward remittance through normal banking channels.
  • Maturity proceeds of Government securities including National Plan/Savings Certificate as well as proceeds of Government securities and units of mutual funds sold on a recognised stock exchange in India and sale proceeds of units received from mutual funds, provided the securities/units were originally purchased by debit to the account holder's NRE/FCNR account or out of remittances received from outside India in free foreign exchange.
  • Refund of share/debenture subscriptions to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from other NRE/FCNR account of the account holder or by remittance from outside India through normal banking channels.
  • Refund of application/earnest money made by the house building agencies on account of non-allotment of flat/plot, together with interest, if any (net of income-tax payable thereon), provided the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the authorised dealer is satisfied about the genuineness of the transaction.
  • Any other credit if covered under general or special permission granted by Reserve Bank.

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 Bank.

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 upto Rs. 20 lakh

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

Loans outside India
Authorised 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 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 India).

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 authorised 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 accounts.

Special Series of Cheques -
  • Temporary Overdrawing - permitted from NRE Savings Bank account up to Rs. 50,000 for a period not exceeding two weeks.
  • Remittances abroad by Resident nominee - application for meeting the liabilities if any of the deceased account holder or similar other purposes, should be forwarded to RBI for consideration.
  • Tax Exemption - Interest income exempted from income tax, balances held are also exempt from wealth tax.
  • Reporting - Transactions to be reported to the Reserve Bank of India.

 

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