NRI Banking –

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.

NRI accounts are maintained by banks which hold authorised 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 authorised dealers.
The financial budget for 2007-08 extends NRI accounts to regional
rural banks (RRBs) as well. This 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 authorised dealers
to be maintained in Indian rupees and in foreign currency.

The Foreign Exchange Management Act, 1999 determines the laws
regulating foreign exchange and enlists the various deposit schemes
available to Non-Resident Indians
The types of deposit schemes made available to NRIs are:

a) FCNR (B) – Foreign Currency (Non-Resident)
Account (Banks) Scheme for all NRIs
b) NRE Account – Non- Resident (External) Rupee
Account for all NRIs
c) NRO Account – Non-Resident Ordinary Rupee
Account Scheme.

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 2006-2007, as per RBI statistics,
are USD 37,751 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.