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A working report by the RBI on the cost of c

 in May 2006 found that money flows are determined by the
economic health in the host country. The dollars poured in from the Middle East workers in the 1980s, but the source of
remittances has now shifted to the West, mainly the USA. This shift in source, says the study, has also meant that growth
potential for remittance flows has now moved to traditionally high cost economies which will affect cost of NRI rem ittances.
Currently, the Middle East contributes to 35% of total inward remittances, followed by 30 to 35% from North America, 20%
from Europe, and 10% from other regions. The global remittance market is estimated at $110 billion, including India -bound
remittances of almost $11 billion.

   
  


Ê The RBI has advised banks to minimize costs of remittances by reducing their charges at the domestic end and at
the foreign end.
Ê It has suggested an awareness programme through the b anks' web sites to encourage NRIs to use Indian banks or
foreign banks having branches in India to transfer money to India.
Ê NRIs can affect the remittances in foreign currencies with instructions for conversion into Indian Rupees at the
Indian end to get the benefit of a better exchange rate.
Ê Moreover, public sector banks can explore the feasibility of setting up centralized remittance receiving centre,
extending the scope of real time gross settlement between banks in India.
The report proposes to dispense with existing restrictions on the number of tie -ups by banks with exchange houses and the
number of drawee branches for rupee drawing arrangements. However these relaxations could be extended to banks only
with sound risk management systems.
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To meet the specific needs of non -resident Indians related to their remittances, savings, earnings, investments and
repatriation, the Government of India introduced i n 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.
Banking Laws for NRIs allow for accounts with authorised dealers to be ma intained 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 avail able to NRIs are:

a) · c Foreign Currency (Non-Resident) Account (Banks) Scheme for all NRIs
b) c 

 Non- Resident (External) Rupee Account for all NRIs

c) c 

 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.





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Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can open and maintain c 

  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.



  Savings, Current, Recurring or Fixed Deposit accounts. 

   !Payments for local expenses and investments are a llowed freely. Credits to an account, of funds
emanating from a local source would be permissible only if the funds are of a repatriable nature.

"   

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

Ê 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, depo sited 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 acc ount holder and in the
case of travellers' cheques, they were issued outside India.
Ê 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 For m (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.

" 

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

·
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  #  · 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. 

Ê Accounts may be opened with funds remitted from outside, existing NRE/ FCNR accounts, etc.
Ê Remittances should be in the designated currency.
Ê Conversion to currency other than the designated currency also permitted at the risk and cost of the remitter.

·· c 

 

Ê The account can be opened with funds remitted from abroad, or transferred from an existing NRE/FCNR account.
Ê FCNR accounts can be opened with designated currencies, which are: GBP, USD, Deutsche Mark, Japanese Yen
and the Euro.
Ê Conversion to another designated currency is pe rmitted at a cost to the account holder.
Ê Only term deposits can be maintained in FCNR accounts, in a time range of 6 months to 3 years.

c
 

 Ê 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.
Ê Banks are also free to decide on a fixed or a floating rate of interest on FCNR term deposits.
Ê Interest rates are reviewed periodically and determined by dir ectives from the Reserve Bank (Department of
Banking Operations and Development).
Ê The account holder can choose the periodicity of interest, from half -yearly to annual payments. The interest can be
credited to a new FCNR (B) account or a NRE/NRO account.
Ê For permissible debits and credits, the regulations for FCNR accounts are similar to the NRE accounts.
Ê For conversion of currencies, from designated currency to rupees and vice versa, the day¶s rate of conversion will
apply.
Ê Funds from the FCNR account are allowed to move within the country at no extra cost to the account holder.
Ê For loans and overdrafts against FCNR accounts, the same conditions as the NRE accounts apply.
Ê In case of premature withdrawal of the FCNR Term Deposit, a penalty is levied. Interes t paid on the account is
calculated at a 1% below the committed rate if accounts are closed prematurely.
Ê However, no interest is paid on deposits held for less than 6 months, and a penalty would have to be paid as per
directives from the apex bank. The RBI guidelines prevail on these terms, issued as and when required.


c
   c 
 



Ê 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.
Ê Individuals or entities of Bangladeshi or Pakistani nationality or ownership require approval from the RBI.


 
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.
% 

 &   $c   
Joint accounts are permitted with resident and non -residents.
"  $ 

 

Ê Remittances from outside India through normal banking channels received in freely convertible foreign currency.
Ê 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.
Ê 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.


Ê All payments towards expenses and investments in India

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





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 ·c    ·

 
Returning NRIs/ PIO may open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC)
Account to transfer balances held in NRE/FCNR (B) accounts. Proceeds of assets held outside India at the time of return,
can be credited to the RFC account. The funds in RFC accounts are free from all restrictions regarding utilisation of foreign
currency balances including any restriction on investment in any form outside India.

· 


 

A person resident in India can open, hold and maintain with an authorized dealer in India, a Resident Foreign Currency
(Domestic) Account, out of foreign exchange acquired in the form of currency notes, Bank notes and travellers cheques from
any of the sources like, payment for services rendered abroad, as honorarium, gift, services rendered or in settlement of any
lawful obligation from any person not resident in India
The account may also be credited with/opened out of foreign exchange earned like proceeds of export of goods and/or
services, royalty, honorarium, etc., and/or gifts received from close relatives (as defined in the Companies Act) and
repatriated to India through normal banking channels by resident individuals.

· c '
Ê www.nrirealtynews.com
Ê www.indianground.com
Ê www.nribanks.com

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