NRI ACCOUNT (BANKING)

A Project Submitted to
University of Mumbai for partial completion of the degree of
Bachelor in Commerce (Accounting and Finance)
Under the Faculty of Commerce

By
Vishal Birendra Dwivedi
Roll No. 46

Under the Guidance of

Prof. Vasanthi Shenoy

Late Shri Vishnu Waman Thakur Charitable Trust’s

Bhaskar Waman Thakur College of Science,
Yashwant Keshav Patil College of Commerce,
Vidhya Dayanand Patil College of Arts.

VIVA COLLEGE
(NAAC ACCREDITED- ‘B’ GRADE, CGPA 2.69)

ACADEMIC YEAR
2018-19
 Late Shri Vishnu Waman Thakur Charitable Trust's
Bhaskar Waman Thakur College of Science,
Yashvant Keshav Patil College of Commerce,
Vidhya Dayanand Patil College of Arts,
VIVA College

Certificate
This is to certify that Mr. Vishal Birendra Dwivedi has worked and duly completed
her/his Project Work for the degree of Bachelor in Commerce (Accounting &
Finance) under the Faculty of Commerce in the subject of Accountancy and Finance
and her project is entitled,“NRI ACCOUNT(BANKING)” under my supervision.

I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma of
any University.

It is his own work and facts reported by her/his personal findings and investigations.

Name of Guiding Teacher: Prof. Vasanthi Shenoy

Signature :

Date of submission:

Signature

External Examiners
 DECLARATION

I the undersigned Mr. Vishal B. Dwivedi here by, declare that the work
embodied in this project work titled NRI ACCOUNT (BANKING), forms
my own contribution to the research work carried out under the guidance of
Prof. Vasanthi Shenoy is a result of my own research work and has not
been previously submitted to any other University for any other Degree to
this or any other University.

Wherever reference has been made to previous works of other, it has been
clearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

Name of learner: Vishal B. Dwivedi

Signature :

Certified by

Name of Guiding Teacher: Prof. Vasanthi Shenoy

Signature :
 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous and
the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Dr. A.P. Pandey & Vice Principal
Prof. Prajakta Paranjape for providing the necessary facilities required
for completion of this project.

I take this opportunity to thank our Coordinator Dr. Audrin Colaco, for
their moral support and guidance.

I would also like to express my sincere gratitude towards my guide Prof.

Vasanthi Shenoy whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my Parents
and Peers who supported me throughout my project.
 INDEX

CHAPTER TOPIC NAME PAGE

NO NO

01 INTRODUCTION : 1-17
1.1 MEANING
1.2 DEFINITION

02 OBJECTIVES 18

03 REVIEW OF LITERATURE 19

04 NRI BANKING:RESEARCH METHODOLOGY 20-47

4.1 DEPOSITORYS SCHEME FOR NRIs

4.2 SERVICES OFFERED BY VARIOUS BANK TO

NRIs

4.3 RBI ISSUES GUIDELINES FOR MONEY

TRANSFER SCHEME

4.4 NRI INVESTMENTS

4.5 PAN CARD FOR NRI

05 CASE STUDY ON NRI 52-54

06 CONCLUSION 55

BIBLIOGRAPHY
 01. INTRODUCTION

1.1 MEANING:

As per RBI guidelines, the residential status of an Indian changes to that of the
NonResident, in the event of his stay abroad being more than 183 days. This period of

183 days is not applicable in certain cases like going overseas for employment or business.
It is mandatory to inform the bank of your change of your residential status.

With a view to attract the savings and other remittance into India through banking
channels from the person of Indian Nationality / Origin who are residing abroad and
bolster the balance of payment position, the Government of India introduced in 1970
Non-Resident(External) Account Rules which are governed by the Exchange Control
Regulations. The funds held in Non-Resident (External) Accounts (NRE Accounts)
qualify for certain benefits like exemptions from taxes in India, free repatriation
facilities, etc.

NRI banking facilities are available to NRIs and PIOs.

 NON – RESIDENT INDIAN (NRI):

A Non Resident Indian (NRI) as per FEMA 1999 is an Indian citizen or Foreign
National of Indian Origin resident outside India for purposes of employment, carrying
on business or vocation in circumstances as would indicate an intention to stay outside

1
India for an indefinite period. An individual will also be considered NRI if his stay in
India is less than 182 days during the preceding financial year.

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.

"Non Resident Indian" (NRI) means an Indian citizen or a foreign citizen of Indian
origin (excluding citizens of Bangladesh and Pakistan) residing outside India. Students
studying abroad are also treated as NRIs.

Indian citizen who stays abroad for an indefinite period on employment, business or
on any vocation is a Non-Resident. Diplomats posted abroad, persons posted in UN
Organizations and Officials deputed by PSU on temporary assignments are also treated
as Non-residents

 PIO CARD SHCEME:

The Government has launched a comprehensive Scheme for the Persons of Indian

Origin-called the ‘PIO Card Scheme’. Under this Scheme, Persons of Indian Origin up
to the fourth generation (great grandparents) settled throughout the world, except for a
few specified countries, would be eligible. The Card would be issued to eligible
applicants through the concerned Indian Embassies/High Commissions/Consulates
and for those staying in India on a long term visa, the concerned Foreigners Regional
Registration Officer (Delhi, Mumbai, Calcutta, Chennai) would do the same. The fee
for the card, which will have a validity of 20 years, would be US$1000.

In this scheme, unless the context otherwise requires-

"Person of Indian origin" means a foreign citizen (not being a citizen of Pakistan,
Bangladesh and other countries as may be specified by the Central Government from
time to time) if,

2
 He/she at any time held an Indian passport; or
 He/she or either of his/her parents or grandparents or great grandparents was
born in and permanently resident in India as defined in the Government of India
Act, 1935 and other territories that became part of India thereafter provided
neither was at any time a citizen of any of the aforesaid countries (as referred
to in 2(b) above); or

 He/she is a spouse of a citizen of India or a person of Indian origin covered

under (i) or (ii) above.

Besides making their journey back to their roots simpler, easier and smoother, this
Scheme entitles the PIOs to a wide range of economic, financial, educationaland
cultural benefits. The benefits envisaged under the Scheme include:-

 No requirement of visa to visit India;

 No requirement to register with the Foreigners Registration Officer if

continuous stay does not exceed 180 days. If continuous stay exceeds 180 days,
then registration is required to be done within a period of 30 days of the expiry
of 180 days;

 Parity with Non-Resident Indians in respect of facilities available to the latter

in economic, financial, educational fields etc. These facilities will include:

 Acquisition, holding, transfer and disposal of immovable properties in India

except of agricultural/plantation properties;

 Admission of children in educational institutions in India under the general

category quota for NRIs- including medical/engineering colleges, IITs, IIMs
etc.

 Various housing schemes of Life Insurance Corporation of India, State

Governments and other Government agencies;

 All future benefits that would be extended to NRIs would also be available to
the PIO Card holders;

3
 However, they shall not enjoy political rights in India.

 OCB:

Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals

of Indian nationality or origin resident outside India and include overseas
companies, partnership firms, societies and other corporate bodies which are
owned, directly or indirectly, to the extent of at least 60% by individuals of Indian
nationality or origin resident outside India as also overseas trusts in which at least
60% of the beneficial interest is irrevocably held by such persons. Such ownership
interest should be actually held by them and not in Te capacity as nominees. The
various facilities granted to NRIs are also available with certain exceptions to OCBs
so long as the ownership/beneficial interest held in them by NRIs continues to be
at least 60% What are the various facilities available to NRIs/OCBs?

NRIs/OCBs are granted the following facilities:

 Maintenance of bank accounts in India.

 Investment in securities/shares of, and deposits with Indian firms/ companies.

 Investments in immovable properties in India.

KEY BENEFITS:

 NRI-Banking follows a modular structure. The various modules render our

NRI Banking solution offerings (which are stated below) in a seamlessly
integrated fashion.

 The Masters module permits maximum parameterization to be done, enabling

the end user to make all changes with regard to Interest Rates or with regard to
any changes as per directives from Head Office / RBI.

 Maintains Bank, Branch and holiday details

4
  Facilitates maintenance of Instrument, Interest rate and overdue interest rate
details Masters. Inventory, Currency, Country, Exchange rate and return reason
details are also maintained Favors opening, authorization and freezing of
Accounts Transaction entry and passing is made easy Provisions availed for
issuing, passing and stop payment of cheques.

 Supports Account closure, Preclosure, Renewal & overdue renewal of

Deposits.
 Aids Day Begin,Day End & Month End Processing
 Processes Quarterly, and transfer to Inoperative & Half Yearly - SB Interest
Calculation.
 Hastens Deposit Receipt Printing, Changing to RFC, Interest Payment &
Overdue Process.

 Supports Acceptance and Execution of standing instruction.

 Types of Accounts:

NRI accounts are maintained by banks which hold authorized 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
authorized 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 authorized dealers to be maintained
in Indian rupees and in foreign currency.

Various accounts:

 NRE A/c – Non Resident (external) Rupee Account.

 FCNR-B A/c - Foreign Currency Non Residential Account.

5
 NRO A/c - Non Resident Ordinary Account.

 RFC A/c - Resident Foreign Currency Account.

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.

Banks offer two types of accounts to NRIs, based on their reparability.

Repatriable Accounts:

Funds that can be transferred or repatriated abroad are maintained in a Non Resident
External Bank account. Generally, funds remitted from outside India are credited to
this account. Investments made from foreign funds can be repatriated overseas, and
such investments are maintained in a Repatriable Demat account.

 Non-Resident (External) Rupee (NRE) Accounts:

 Both Principal and Interest can be repatriated/transferred out of India Savings rate on
NRE accounts is at par with savings rates in resident accounts Term deposits can be
made for 1 to 3 years.

6
 The interest rates on (NRE) Term deposits cannot be higher than LIBOR/SWAP rates
as on the last working day of the previous month, for US dollar of corresponding
maturity plus 50 basis points.

The interest rates on three year deposits also apply in case the maturity period exceeds
three years. The change in interest rate also applies to NRE deposits renewed after their
present maturity period.

 FCNR (B) Accounts:

 As in NRE accounts, both principal and interest are repatriable.

 Presently, deposits can be made in 6 specific foreign currencies (US Dollar, Pound
Sterling, EURO, Japanese Yen, Australian Dollar and Canadian Dollar).

 Interest rate- Fixed or floating within the limits of LIBOR/SWAP rates for the
respective currency/corresponding term minus 25 basis points (except Japanese Yen).
 The term of deposits can range between 1 to5 years.

 NRO Accounts:

 Only current earnings are repatriable.

7
 Savings NRO accounts are normally operated to credit rupee income from shares,
interest, rent from property in India, etc.

 In case of term deposits, banks are allowed to determine their own interest rates.

Banks can allow remittance up to USD 1 million per financial year for bonafide
purposes from balances in the NRO accounts once taxes are paid out. This limit
includes the sale proceeds of immovable properties held by NRIs and PIOs.

Resident Foreign Currency (RFC) Account:

NRIs and PIOs returning to India can maintain an RFC account with an authorized
bank in India to transfer funds from their NRE/FCNR (B) accounts. Proceeds of assets
held outside India before their return to India can be credited to the RFC account. These
funds are free from all restrictions as to their utilization or in investment in any form
outside India.

Non-Repatriable Accounts:

Non-repatriable funds are those which cannot be taken out of India. These have to be
maintained in a separate bank account i.e. a Non Resident Ordinary Bank account.
Investments made from non-repatriable accounts cannot be repatriated but have to be
maintained in a Non-Repatriable Demat account. Money once transferred from an
NRE account to an NRO account cannot be transferred back to an NRE account.

 Non Resident Ordinary (NRO) Account:

o When a resident becomes an NRI, his existing savings account is designated as a

Nonresident Rupee (NRO) account.

8
o The NRO accounts could be maintained in the nature of current, saving, recurring or
term deposits. NRIs can also open NRO accounts for depositing their funds from local
transactions.

o The interest earned from NRO accounts is accountable to tax laws.

o NRO accounts can be opened in the name of NRIs who have left India to take up
employment or business temporarily or permanently in a foreign country.

o Funds from NRO accounts are not repatriable or transferred to NRE accounts without
the prior approval of the RBI.

However, NRIs, PIOs, Foreign Nationals, retired employees or non-resident widows

of Indian citizens can remit, through the Authorized Dealer, up to USD one million per
calendar year from the NRO account or from income from sale of assets in India

 OPENING OF NRI ACCOUNT:

To open an NRE account please complete the account opening form and mail it to the
branch of your choice along with-

 Passport copy
 Visa/residence permit
 2 photographs
 initial money remittance

9
 Your signature may be verified by anyone of the following;

o Indian Embassy/consulate o Any person known to the Bank o Notary public

o Any of our offices abroad You can open-

o NRE Saving Bank a/c / Current Accounts o Fixed Deposits in Indian

Rupees o Fixed Deposits in Foreign Currency o NRO accounts (Rupee

accounts for crediting income in India )

You can authorize a resident to operate your account through a Power of Attorney or

Letter of Authority

Nomination Facility available (Nominee can be a resident Indian also) Procedures &
Benefits:

o Non-Resident accounts can be opened along with your remittances through

Banking channel.

o Photograph shall be enclosed with the opening form.

o There is no ceiling on the amounts remitted for your credit in Non-Resident
account.

o When the NRI depositor returns to India, the NRE account will be
automatically treated as Resident account. However NRE term deposit will
continue to earn same rate till maturity even after such conversion.

o NRE accounts earn more interest than domestic deposits.

o Nomination facilities are available for registration in favor of a non resident

or resident.

o Loans against deposits are allowed for purposes other than investment up to
90% of the deposit.

10
 o The income from deposit is free from Indian Income Tax. o It is also free

from Gift tax for one time gifting.

Documents Required:

In case account opened in person:

Indian passport with overseas resident address or work permit (i.e. Green Card as
residence permit for USA, H1 Visa as work permit for USA or Hongkong ID card for
residence of Hongkong)

Separate proof of Non Resident status if the passport holds Indian address and resident

Visa permit is not included in passport. Photograph of individual account holder For

persons employed with foreign shipping company

o Initial work contract Last wage slip For contract employees

o Last work contract

o Letter from local agent confirming next date of joining the foreign vessel (not

more than six months from date of last return to India) o Principal's overseas

address or current work contract In case of documents sent by mail

o All the relevant above mentioned documents / signatures to be attested by

any one of the following:

o Indian embassy overseas notary o Local bank

11
 Minimum balance in which one can open an account (Differs from
bank to bank):

NRO Saving Account Rs.5,000/- , NRO - Current Account Rs.10,000/- , NRO

Term Deposit Account Rs.5,000/-

NRE Savings Account Rs.5,000/- , NRE Current Account Rs.10,000/- ,NRE

Term Deposit Account Rs.10,000/-

FCNR – Term Deposit Account – USD 500/- or its equivalent in GBP or Euro

If you submit the money for opening/credit to an account. Frequency of Interest

payment on accounts:

NRO Term Deposit Account Half yearly

NRE Savings Account Quarterly

NRE Term Deposit Account Half yearly

FCNR Term Deposit Account Quarterly

12
 Opening of JOINT ACCOUNTS:

Type of account Joint Account with Joint Account with

Non-
Resident Indians
Resident Indians

NRO Yes Yes

NRE No Yes

FCNR No Yes

1.2. DEFINITION:

An Indian abroad is popularly known as an NRI – but the same has two important
definitions - one coined under the Foreign Exchange Management Act, 1999 –
[FEMA] and the other as per the Income Tax Act, 1961.
 FEMA definition:

The most relevant definition concerning an NRI's various bank accounts and
investments in movable and immovable properties in India is the one provided by
Foreign Exchange Management Act, 1999 – [FEMA], which has replaced the Foreign
Exchange Regulation Act , 1973- [FERA] with effect from June 1,2000.

13
 Person Residing Outside India is the term used for an NRI , being a person who
has gone out of India or who stays outside India for the purpose of employment or
carrying on business or vocation outside India or any other circumstances which
indicate his intention to stay outside India for an uncertain period.

Section 2(v) of FEMA,1999

 Person resident in India" means,

 a person residing in India for more than one hundred and eighty-two days
during the course of the preceding financial year but does not include

 a person who has gone out of India or who stays outside India, in either case

(a) For or on taking up employment outside India, or

(b) For carrying on outside India a business or vocation outside India, or

(c) For any other purpose, in such circumstances as would indicate his
intention to stay outside India for an uncertain period;

A person who has come to or stays in India, in either case, otherwise than—

 For or on taking up employment in India, or

 For carrying on in India a business or vocation in India, or

 For any other purpose, in such circumstances as would indicate his intention
to stay in India for an uncertain period;

(a) Any person or body corporate registered or incorporated in India,

(b) An office, branch or agency in India owned or controlled by a person
resident outside India,

14
 (c) An office, branch or agency outside India owned or controlled by a
person resident in India;

2(w) "Person Resident Outside India" means a person who is not resident in India;

 Non Resident Indian, the phrase is for the first time defined in the regulations as “a
person resident outside India who is either a citizen of India or a person of Indian
Origin".

Recently RBI has clarified that students studying abroad also be treated as NRIs
under FEMA and accordingly be eligible for foreign investments and
NRE/FCNR a/cs

And the definition of "a person resident outside India " is simply put as " a person
who is not Resident in India."

NOW, reading both the definitions together, it can be summarized that both:

• an Indian Citizen residing outside India and also

• a Foreign Citizen of Indian origin residing outside India are defined as

NonResident Indians.

 Person of Indian Origin:

F.E.M.A.(Deposit) Regulations define a Person of Indian Origin (PIO) as:

• a person, being a citizen of any country other than Pakistan and Bangladesh, who
at any time held an Indian Passport. or

• a person who himself or either of his parents or any of his grandparents were
citizens of India, or

• a spouse of an Indian citizen, or

• a spouse of a person covered under (i) or (ii) above.

15
  2(xii) 'Person of Indian Origin' means a citizen of any country other than
Bangladesh or Pakistan, if

• he at any time held Indian passport; or

• he or either of his parents or any of his grand- parents was a citizen of India by
virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955) or

• the person is a spouse of an Indian citizen or a person referred to in sub-clause

Person of Indian Origin (PIO) defined under Regulations re: Immovable Property
in India:

This definition is further narrowed when it comes to rules regarding acquisition and
transfer of immovable property in India. Probably with an intention of ensuring &
restricting control of immovable properties in the hands of strictly defined persons of
Indian Origin only, this definition is further narrowed to exclude individuals being
citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and
Bhutan.

As regards immovable property transactions it may be noted that herein the person's
father or grandfather is included unlike parents or grandparents and spouse in earlier
definition.

Accordingly a Person of Indian Origin is defined herein as:

a) Who held an Indian Passport at any time?

An individual other than citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan,

China, Iran, Nepal and Bhutan, or

b) Who himself or his father or grandfather was a citizen of India.

[Regulation 2(c) of FEMA (Acquisition and Transfer of Immovable Property in India)

Regulation 2000]

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 2(c) 'a person of Indian origin' means an individual (not being a citizen of Pakistan or

Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who

(a) at any time, held Indian passport; OR

(b) who or either of whose father or whose grandfather was a citizen of India
by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of
1955);

 Conditions of number of days stay in India:

 No doubt, Foreign Exchange Management Act, 1999 definition has also incorporated
an NRI's stay of 182 days or less during a year in India, but simply speaking if a person
of Indian origin has gone out of India for settlement he is to be treated as an NRI
irrespective of number of days he has stayed in India.

 Stay in India during visits:

 The Act also lays down that such a person will continue to be an NRI during his
visit/stay in India provided he has not returned to India for taking up employment or
carrying on business or vacation or any other circumstances as would indicate his
intention to stay in India for an uncertain period. Accordingly, an NRI settled abroad,
irrespective of the number of days stay in India will continue to be an NRI during his
visit to India provided he has not returned to India for permanent settlement.

 "Overseas Corporate Body" (OCB) means a Company, Partnership Firm, Society etc.
wherein 60 % or more ownership lies with NRIs or a Trust wherein 60 % or more
financial interest is irrevocably held by NRIs.

2(xi) " Overseas Corporate Body (OCB)" means a company, partnership firm, society
and other corporate body owned directly or indirectly to the extent of at least sixty per
cent by Non-Resident Indians and includes overseas trust in which not less than sixty
per cent beneficial interest is held by Nonresident Indians directly or indirectly but
irrevocably.

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 2. OBJECTIVES :

 To get an overview of NRI BANKING SERVICES

 To analyse the growth of NRI banking services

 To study the innovative concepts emerging in the banking industry for NRI’s

 To observe the facility provided to NRI by Indian banks

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 03. REVIEW OF LITERATURE

Banking is a prime mover in the economic development of a nation and research is so

essential to improve its working results. The management without any right policy is
like "building a house on sand". It means an effective management always needs a
thorough and continuous search into the nature of the reasons for, and the
consequences of organization. In line with this, some related earlier studies conducted
by individuals and institutions are reviewed to have an in-depth insight into the
problem and exploring the reformation of banking policy

In order to conduct the research an appropriate methodology became necessary. In this

direction both primary as well as secondary data were attempted to be collected. The
methodology for collecting data with reference to the secondary data was taken from
the different published articles, books, journals, and the relevant websites. The library
of the college was of great help.

The questionnaire was initially prepared in tough sketch at the first instance. These
questions were discussed with our internal guides and our teaching faculty. They have
provided valuable suggestions, additions deletions and modification of the rough
questionnaire. Methodology became a preplanned strategy in collecting, editing,
tabulating and in interpreting the required information for the research. Thus
methodology relied on both primary and secondary data with the help of
questionnaires, discussions, observations as well as published work and unpublished
work.

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 04. NRI BANKING: RESEARCH METHODOLOGY

4.1 DEPOSITORY SCHEMES FOR NRI

 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 and 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 travelers 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

20
 temporary visit to India provided the authorized dealer/bank is satisfied that the account
holder is still resident outside India, the travelers’ cheques/drafts are standing/endorsed
in the name of the account holder and in the case of travelers’ cheques, and 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 authorized dealer in person by the account holder
himself and the authorized dealer is satisfied that account holder is a person resident
outside India.

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 Accou

 To the account holder

21
(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 up to Rs. 20 lakh
To Third Parties

22

 The loan should be utilized 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

Authorized 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 authorized 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

23

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.

 Foreign Currency (Non-Resident Indians) FCNR (B) Account

Eligibility to Open and Maintain FCNR A/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.

 Accounts may be opened with funds remitted from outside, existing NRE/ FCNR
accounts, etc.

 Remittances should be in the designated currency.

 Conversion to currency other than the designated currency also permitted at the
risk and cost of the remitter.

Features of FCNR Account:

 The account can be opened with funds remitted from abroad, or transferred from
an existing NRE/FCNR account.

24

 FCNR accounts can be opened with designated currencies, which are: GBP, USD,
Deutsche Mark, Japanese Yen and the Euro.

 Conversion to another designated currency is permitted at a cost to the account

holder.
Only term deposits can be maintained in FCNR accounts, in a time range of 6 months
to 3 years.

 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.

 Banks are also free to decide on a fixed or a floating rate of interest on FCNR term
deposits.

 Interest rates are reviewed periodically and determined by directives from the
Reserve Bank (Department of Banking Operations and Development).

 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.

 For permissible debits and credits, the regulations for FCNR accounts are similar
to the NRE accounts.

 For conversion of currencies, from designated currency to rupees and vice versa,
the day’s rate of conversion will apply.

 Funds from the FCNR account are allowed to move within the country at no extra
cost to the account holder.

 For loans and overdrafts against FCNR accounts, the same conditions as the NRE
accounts apply.

 In case of premature withdrawal of the FCNR Term Deposit, a penalty is levied.

Interest paid on the account is calculated at a

25

 1% below the committed rate if accounts are closed prematurely.

 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.

26
 FCNR A/c after Change in Resident Status:

 NRI deposits such as the FCNR can continue till the maturity date at the contracted
rate of interest even after the account holder’s resident status changes to resident
Indian.

 However, except for interest rates and reserve requirements of FCNR deposits, these
accounts are treated as resident accounts effective from the account holder’s date of
return to India.

 On maturity, these accounts are converted to either an RFC account or the Resident
Rupee Deposit account.

 As for joint accounts, the same rules as those for NRE accounts apply to FCNR
deposits too.

 For repatriation of funds from the FCNR account, the same conditions as those for
NRE accounts apply.

 The RBI does not provide any guarantee on foreign exchange.

Other Features:

 Reserve Bank will not provide foreign exchange guarantee.

 Lending of resources mobilized by authorized dealers under these accounts are not
subject to any interest rate stipulations.

 Non-Resident Ordinary Rupee (NRO) Account:

Eligibility

 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.

27
 Individuals or entities of Bangladeshi or Pakistani nationality or ownership require
approval from the RBI.

Types of Accounts
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.

Joint Accounts with Residents/Non-residents

Joint accounts are permitted with resident and non-residents.

Permissible Credits/Debits :

Credits -

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

 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.

 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.

Debits -

 All payments towards expenses and investments in India

 Payment outside India of current income like rent, dividend, pension, interest etc. in
India of the account holder.

28
 Repatriation up to USD One million, per calendar year, for all bonafide purposes with
the approval of the authorised dealer.

Remittance of Assets :

NRIs and PIO may remit upto USD One million per calendar year, out of balances held
in the NRO account which could be acquired from the sale proceeds of assets acquired
in India out of rupee or foreign currency funds or by way of inheritance from a resident
Indian, provided:

Assets acquired in India out of rupee/foreign currency funds

(a) Immovable property: NRIs and PIO may remit sale proceeds of immovable property
purchased by them when they were resident or out of Rupee funds as

NRI or PIO.

(b) Other financial assets: There is no lock-in period for remittance of sale proceeds of
other financial assets

Assets acquired by way of inheritance:

Sale proceeds of assets acquired through inheritance can be remitted. No lock-in period
applies here if the authorised dealer is satisfied that the proceeds are from inherited
property.

Remittance of assets out of NRO account by a person resident outside India other than
NRI/PIO

A foreign national who is not a citizen of Pakistan, Bangladesh, Nepal or Bhutan and who

 has retired as an employee in India,

29
 has inherited assets from a resident Indian, or

 is a widow residing outside India and has inherited assets of her deceased husband who
was a resident Indian can remit upto USD one million per calendar year on production
of documentary evidence to support the acquisition by way of inheritance or legacy of
assets to the authorised dealer.

Restrictions :

The above facility of repatriation from sale of immovable property is not extended to
citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and
Bhutan. Remittance of sale proceeds from other financial assets is not extended to
citizens of Pakistan, Bangladesh, Nepal and Bhutan.

Foreign Nationals of non-Indian origin on a visit to India

Foreign nationals of non-Indian origin are permitted to open a NRO account

(current/savings) on their visit to India with funds remitted from outside India through
normal banking channels or by foreign exchange brought to India. The balance in the
NRO account is converted by the bank into foreign currency for payment to the account
holder when he leaves India, provided the account was maintained for less than six
months. The account should not be credited with any local funds during the term, except
for interest accrued on it.

Grant of Loans/ Overdrafts by Authorised Dealers/ Bank to Account Holders and Third

parties

Loans to NRI account holders and to third parties is granted in Indian Rupees by authorized
dealers (banks) against the security of fixed deposits provided:

 The loans are utilized only for meeting the borrower's personal requirements or for
business and not for agricultural/plantation /real estate or relending activities

 RBI regulations pertaining to margin and rate of interest will apply

30
 All norms and considerations which apply to loans to trade and industry will apply to loans
and facilities granted to third parties.

The authorized dealer/bank may allow an overdraft to the account holder subject to his
commercial discretion and compliance with the interest rate directives.

Change of Resident Status of Account holder –

(a) From Resident to Non-resident

When a resident Indian leaves India for taking up employment or for carrying on business
outside India, his existing account is designated as a Non-Resident (Ordinary) Account,
except in the case of persons shifting to Bhutan and Nepal. For the latter, the resident
accounts do not change to NRO accounts.

(b) From Non-Resident to Resident

NRO accounts may be re-designated as resident rupee accounts once the account holder
returns to India for taking up employment, or for carrying on business or for any other
purpose indicating his objective to stay in India for an uncertain period. Where the account
holder is only on a temporary visit to India, the account continues to be treated as non-
resident during the visit.

Treatment of Loans/ Overdrafts in the Event of Change in the Resident Status of the
Borrower

In case of a resident Indian who had availed of loan or overdraft facilities while resident
in India and who subsequently becomes a NRI, the authorised dealer may at its discretion
allow the loan facility to continue. In this case, payment of interest and repayment of loan
may be made by inward remittance or out of bonafide resources in India.

31
 Payment of funds to Non-resident/Resident Nominee

The amount payable to a non-resident nominee from the NRO account of a deceased
account holder is credited to the NRO account of the nominee.

Facilities to a person going abroad for studies

Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are
eligible for all the facilities enjoyed by NRIs. All loans availed of by them as residents in
India will continue to be extended as per FEMA regulations.

International Credit Cards

Authorized dealers are allowed to issue International Credit Cards to NRIs and PIO,
without the permission of the RBI. Such transactions can be made by inward remittance
or out of balances held in the cardholder's FCNR/NRE/NRO Accounts.

Income Tax :

The remittances, after payment of tax are allowed to be made by the authorized dealers
on production of a statement by the remitter and a Certificate from a Chartered
Accountant in the formats prescribed by the Central Board of Direct Taxes, Ministry of
Finance, Government of India

32
 TAX BENEFITS for NRIs

 Interest on NRE & FCNR deposits are free of income tax.

 Tax @ 30% will be deducted at source on all interest income in NRO accounts.

On permanent return to India, income on all investments out of foreign exchange funds
would be eligible for a flat tax rate of 20% (excluding surcharge) till maturity of the
investments

4.2 SERVICES OFFERED BY VARIOUS BANK TO NRIs

 BANKING SERVICES

NRI banking services including deposits, savings accounts, finance like home loans,
personal loans etc. Various banks like ICICI Bank, Citibank, HDFC Bank and many
other nationalized and private banks that hold authorized dealer's licenses from the
Reserve Bank of India (RBI) provide remittances, savings, earnings, investments and
repatriation services.

Besides the major commercial banks, certain cooperative and regional rural banks
(RRB's) have also been specifically permitted to maintain NRI accounts. This would

33
 increase NRI remittances in Bihar, Kerala, U.P. and Gujarat where a large chunk of the
rural population have settled abroad.

The banks also offer finance services to the NRI's that cover home loans for buying new
residential property, housing renovation loans for constructing or modifying on the
existing properties, personal loans and other loan products.

Another FDI (Foreign Direct Investment) magnet has been the various money transfer
services provided. Various banks provide quick, convenient and economical fund remit
to India. These include:

 Online remittance services

 Remittance of funds to partner exchange houses in India

 Telegraphic or wire transfer

 Fund transfer through cheques/ DD's and Travelers' cheques.

Many banks also offer Demat account services to the NRI's that enable NRI's online
stock investment and share trading services. Special NRI credit cards acceptable
globally are available with various banks. These specialized services and banking
accounts have drawn enormous NRI funds to India.

SERVICE OFFERED BY ICICI BANK:-

Rupee plus plan :- At ICICI Bank, we believe in providing you with the most
competitive returns on your hard earned money. Now you can earn even higher returns
on your deposits by investing in Rupee plus plan.

What does the Rupee plus plan offer you :- NRE-FD interest rates rate being regulated
by RBI, is nearly same across banks. In Rupee plus plan we have devised a way to make
your money work harder and smarter and earn higher returns in terms of NRI as
compared to a NRE FD.

Currencies :- you can being funds in any convertible currency, which will be converted
to USD (if not in USD already).

34
Minimum Deposit :- USD 25,000 or equivalent.

Tenor: - for 1 year only.

How does the Rupee plus plan work? Instead of putting the money in NRE FD directly,
the money is put in USD denominated FCNR. This FCNR earns interest as per
prevailing FCNR interest rates.

Additionally, at the time of booking the FCNR a Forward Agreement is also drawn to
exchange the maturity amount of USD to Rupees at a given rate (Forward Rate).

Rupee plus plan advantage :- on a average the returns are significantly higher compared
to putting your money in NRE FD as per the prevailing market rates. Returns in rupee
terms are assured once the deal is booked irrespective of the future movements in
currency markets.

The following banking facilities are available to NRIs, as per the current RBI/FEMA
guidelines.

35
Particular Foreign Non- (Non-Resident
s Currency Resident
Ordinary Rupee
(Non- (External)
Account
Resident) Rupee
Scheme(NRO
Account Account Account)
(Banks)
Scheme(NR
Scheme(FC E
NR(B)
Account)
Account)

Who can open NRIs/PIOs NRIs/PIOs Any person resident

an outside India
(other than a person
account resident in Nepal and
Bhutan)

Joint account In the names of two In the names of May be held jointly with
or NRIs two or more NRIs residents

Nomination Permitted Permitted Permitted

Currency in Pound Sterling, US Indian Rupees Indian Rupees

which account is
denominated Dollar, Jap. Yen or

Euro.Australian
Dollar,

Canadian Dollar
Repatriability Repatriable Repatriable Non-repatriable*

Type of Account Term Deposit only Savings, Current, Savings, Current,

Recurring, Fixed Recurring, Fixed

Deposit Deposit

36
Tax Aspects Interest income Interest income tax Interest income taxable
tax free and no free and no tax and liable for TDS
tax deduction at deduction at source.
source.
@30% plus applicable
surcharge subject to

conditions. DTAA benefit

may be available subject
to fulfillment of
conditions.

4.3 RBI ISSUES GUIDELINES FOR MONEY TRANSFER SCHEME

37
  MONEY TRANSFER

Money can be transferred either through on line or drafts or telegraphically or by wire

transfer or Cheques. E-Transfer is completely online, paperless money transfer service
which enables the customer to send money directly from one bank account in foreign
country to India. Drafts in Indian rupees can be purchased from exchange companies of
one country and mailed to the branch of another country where the customer has the
account. Telegraphic or wire transfers can be made through branch to branch. Cheques
can be deposited for credit of the customer’s accounts and the Cheques will be collected
and credited to their accounts. International SWIFT Transfer

This is a secure, quick and efficient method of transferring funds, which enables you to
send money easily to any bank which is part of the SWIFT network. There is a flat-rate
charge of Rs 500 for each SWIFT transfer made from your account. There is no charge
when you make a transfer from your Barclays NRI account in India to a Barclays
account in UK or UAE.

 Demand (or Banker's) Draft

This is a means of initiating a transfer from your account to a named payee. You can
send the Demand Draft to your intended payee, who will then be able to take the Draft
into their bank following presentation of this Draft, he/she will then receive payment.

A Demand Draft made payable to a non-Barclays account will incur a charge of Rs 3.5 per
Rs 1,000 sent (minimum charge Rs 100).

A Demand Draft made payable to a Barclays account and a Foreign currency DD will
incur a flat-rate charge of Rs 300.

38
  UAE EXCHANGE

PROVIDING speed, convenience and security of transactions, the Xpress Money

Service of UAE Exchange company is proving to be a modern and reliable way of
sending and receiving money from anywhere in the world, especially among the
immigrant Indian in Gulf countries. With an extensive network of branches in UAE and
a global presence in Australia, India, Kuwait, Oman, Qatar, UK, USA, Fiji, Sri Lanka
and Bangladesh, the UAE Exchange Centre specializes in Fund Transfer across the
globe and enjoys a numerous uno status in the industry. UAE Exchange and Financial
Services Ltd makes 80,000 remittances a month. The average amount of remittances per
transfer is Rs 1,25,000.

Western Union Money Transfer

Western Union is a global leader in money transfer services, with a history of pioneering
dating back more than 150 years. Non-resident Indians can now transfer their funds to
India through the Money Transfer Service offered by Western Union.

This service is currently available for inward remittances in India.

"Credits to NRE/FCNR accounts are not permitted to be routed through Money

Transfer Service Scheme (MTSS)"

 SENDWISE:-

A rupee demand draft delivered to the recipient’s doorstep within three to four working
days and can be encashed at any nationalized bank in India.

MONEYGRAM Send money online today:-

You can send money around the world online to over 84,000 moneygram agent
locations, in more than 170 countries. Not only is sending money with moneygram safe
and convenient, you’ll find the same day services to be one fastest way to send your
money online-usually arriving within minutes. Send money online or at a moneygram

39
agent location near you. Moneygram is a global leader in international money transfers
and the largest processor of money orders in the U.S. We help people and business by
providing affordable, reliable and convenient payment services.

ICICI Bank NRI Money Transfer:-

ICICI Bank, the leading bank in India offering financial services to the NRI community
through NRI saving account, NRE Accounts, Fixed Deposit, FCNR deposits, and the
quickest way to send money online to India.

4.4 NRI INVESTMENTS

The Government of India has adopted a liberal policy, with respect to investment by
NRIs and OCBs in India, such investment are allowed, both, through the RBI route and
also through the Government route, i.e., through the Foreign Investment Promotion
Board (FIPB) NRIs and OCBs are permitted to invest up to 100% equity in real estate
development activity and civil aviation sectors. Investment, made by the NRIs and
OCBs, are fully repatriable, except in the case of real estate, which has a 3 year lock-in
period on original investment and, 16% cap on dividend repatriation.

40
 Various investment opportunities in India available to NRIs:-

 If one is NRI, the following investment opportunities are open to you:

 Maintenance of bank accounts in India.

 Investment in securities/shares and deposits of Indian firms/companies.

 Investment in mutual funds in India.

Investment Policy for Non-resident Indians (NRIs):-

Recognizing the investment potential of the Non-resident Indians, a number of steps are
being taken by the government on an ongoing basis to attract from them in Indian
companies. Some of the investment schemes presently available to Non-resident Indians
(NRIs) include the facility to invest upto 100 percent equity with full benefits of
repatriation of capital invested and income accruing thereon in high priority industries
mentioned in the Annexure-III to the industrial policy 1991, 100 percent export oriented
units, sick units under revival, housing and real estate development companies, etc,.
NRIs/PIOs/OCBs are also permitted to make portfolio investments through secondary
markets. In terms of the relaxations announced in 1998-99, investment limits for an
individual NRI has been revised upwards from 1% to 5%, aggregate portfolio investment
limits by all NRIs increased from 55 to 10% of the issued and paid-up capital of the
company. The aggregate investment limit would be separate and exclusive of FII portfolio
investment limits.

FOR NRI’S INVESTMENT:-

In order to help the tax-payers to plan their Income-tax affairs well in advance and to
avoid long drawn and expensive litigation, a scheme of Advance Rulings has been

41
introduced under the Income-Tax Act, 1961. Authority for advance rulings has been
constituted. The tax-payer can obtain a binding ruling from the Authority on issues
which could arise in the determination of his tax liability. A non-resident or certain
categories of resident can obtain binding rulings from the Authority on any question of
law or fact arising out of any transaction/proposed transactions which are relevant for
the determination of this tax liability.

PORTFOLIO INVESTMENT

NRIs/OCBs are permitted to make portfolio investment in shares/debentures

(convertible and non-convertible) of Indian companies, with or without repatriation
benefit provided the purchase is made through a stock exchange and also through
designated branch of an authorized dealer. NRIs/OCBs are required to designate only
one branch authorized by Reserve Bank for this purpose.

NRI’S INTEREST:-

NRIs invested only 5% of their investible assets in India with the balance being parked
overseas. A major reason for this was that the Indian banking system was not a very
preferred and trusted mode of investment for the NRI. The customer was looking for
convenience, speed, high yield on investment with manageable risks, reasonable costs
and quality services – A face of India he could associate with. Competition was not only
from India based banks, but also from local banks based overseas; conventional and non
conventional routes of money transfer.

FACILITATION AGENCIES

The main regulatory and facilitation agencies involved in the matters related to
NRIs/OCBs investment are Reserve Bank of India (RBI), Securities and Exchange
Board of India (SWBI), Authority for Advance Rulings (AAR), Secretariat for Industrial

42
Assistance (SIA), Ministry of Commerce and Industry; and Office of the Chief
Commissioner (Investments & NRIs).

RBI FORMS

NRIs/OCBs/PIOs do not have to seek specific permission for approved activities

covered under ‘General permission’ schemes. The activities relating to
NRIs/OCBs/PIOs not covered under those schemes either require declaration to RBI or
permission from RBI. The activities requiring Declaration/Permission along with
corresponding forms are as under;

TS 1 Transfer of Shares/Debentures by Non-residents to

Residents

FNC Permission to establish a branch office in India by an

Overseas Company establishing a Representative Office
1 by Overseas Company for Liaison Activities to open a
Project/Site Office in India.

FNC Permission to establish a branch office in India by an

Overseas Company establishing a Representative Office
1 by Overseas Company for Liaison Activities to open a
Project/Site Office in India.

IPI Company/Individual (declaration) acquiring property

43
 NRIs, irrespective of their citizenship can freely acquire and transfer residential as also
commercial properties in India barring agricultural land and plantation, with repatriation
of foreign exchange equivalent of cost of acquisition (maxi. two in case of resi.houses)
and no restrictions as regards holding period.

 Rules for Acquisition & Transfer by NRIs being:

 Indian citizen & Foreign citizen

 Mode of Payment

 Joint Holding / Restrictions

 Repatriation of Sale Proceeds

 Taxation of Capital Gains & Wealth-Tax

Rules for Acquisition & Transfer by Foreign Citizen NRIs Purchase / Acquisition:
There is a general permission to acquire any immovable property (other than
agricultural land, plantation or farm-house property) by way of purchase, provided the
payment is made out of foreign exchange inward remittance or any Non Resident bank
account in India, i.e.NR(E),FCNR(B) or NRO a/c..

Acquisition by way of Gift:

General permission is granted to acquire any immovable property (other than

agricultural land, plantation or farmhouse property) by way of gift from a person (donor)
who is

 A person resident in India, or

 Aperson resident outside India (an NRI )who is Indian citizen or foreign citizen of

Indian origin.

44
 Acquisition By Way Of Inheritance :

General permission is granted for inheritance of immovable property including

agricultural land, plantation or farm-house property from

 A person resident in India, or

 A person resident outside India who may be an Indian citizen or foreign citizen of Indian
origin provided such person had acquired said property in accordance with the provisions
of Foreign Exchange Law in force at the time of acquisition. i.e. FERA, 1973 or FEMA
1999.

Hence Agricultural land, plantation or farmhouse property can be acquired by way of

inheritance only.

Transfer / Sale:

General permission is granted for sale of any immovable property (other than agricultural
land, plantation or farmhouse property) to a person who is resident in India.

Transfer of residential or commercial property by way of gift:

General permission is granted to gift residential or commercial property to

 A person resident in India, or

 A person resident outside India who may be an Indian citizen or foreign citizen of Indian
origin,

Transfer of agricultural land, plantation or farmhouse property by sale/ gift

General permission is granted to sell or gift such property to a person who is resident in
India and also an Indian citizen.

45
 Mode of Payment :-

 The payment for purchase of immovable properties is required to be made from NRI's
bank account, being:

a) Non Resident External Account (NRE);

b) Foreign Currency Non Resident (B) Account (FCNR) (B), or

c) Non Resident Ordinary Account (NRO), or

d) Foreign Exchange Inward Remittance from abroad.

 It is advisable to retain records of payment made i.e. banker’s certificate

 All incidental expenses such as stamp duty, registration fees etc. should also be paid
through bank only.

Repatriation of Sale proceeds

 An NRI being an Indian citizen or a foreign citizen of Indian origin is allowed to repatriate
the sale proceeds of an immovable property subject to the following conditions:

a) . the acquisition should be in accordance with the existing Foreign Exchange Laws
(i.e. FERA, ‘73 or FEMA ‘99).
b) the purchase price was met out of Foreign Exchange Inward Remittance or NRE /

FCNR (B ) account, and

c) in case of residential properties, repatriation is restricted to a maximum of two properties.

It may be noted that the eligibility criteria of holding period of 3 years for
repatriation is removed w.e.f. 29-06-02.[ vide notification no FEMA 65/2002 RB dated
29-06-02.]4

46
 It may be noted that there are no restrictions as re: repatriation of sale proceeds visa-vis
number of commercial or industrial properties.

 The amount of repatriation is restricted to foreign exchange equivalent of the purchase

price i.e. profits / gains are not allowed to be repatriated.

 DEMAT ACCOUNT :-

A demat account facilitates buying and selling shares, precluding cumbersome paperwork
and meaningless delays.

Advantages of a Demat Account -

 It is a safe, secure and convenient mode of transacting in shares.

 Minimizes brokerage charges

 Ensures immediate liquidity

 Removes uncertainty on ownership title of securities

 Allows quick allotment of public issues

 Enables smooth process in pledging shares

 Avoids delays due to wrong/incorrect signatures, post, and misplacement of certificates

 Prevents risks like forgery and counterfeit, theft or damage to documents

 Saves on stamp duty, paperwork on transfer deeds Gives immediate benefits from bonus
shares and stock splits Who offers Demat Facility?
Depository Participants or DPs offer demat account services, which would include
banks. Holding a demat account with a bank enables quick on-line dealings, ensuring
credit of a transaction to the account holder’s savings account by the third day. Banks
have an added advantage over other DPs with their large network of branches.

How to Open a Demat Account in India

47
 Fill up the demat account opening form at the nearest Depository Participant

 You may refer to either

CDSLathttp://www.cdslindia.com/demat_acct/open_demat.jsp or
NSDLathttps://nsdl.co.in/for the list of DPs in India.

 Joint demat accounts can be opened, retaining the same order of names

 Separate demat accounts have to be opened for different combinations of names in the
case of three or more joint holders.

 Any number of demat accounts and DPs are permitted

 A multiple-sign demat is feasible, operated by several holders

 DPs charge a fee for switching shares from electronic to physical form and viceversa,
which varies from a flat fee to a variable fee. Remat and demat charges may also show a
discrepancy between DPs.

 Some DPs offer a discount to frequent traders.

 It is advisable to maintain all demat accounts with the same DP to keep track of capital
gains liabilities. Different DPs follow dissimilar methods of computing the capital gains,
which is determined by the period of holding.

 The charges on a demat account vary between DPs. Broadly, they are: account opening
fee, an annual folio maintenance charge paid in advance, a monthly custodian fee, and a
charge on transactions, which may either be charged every month or as a flat fee per
transaction, and its nature. Some DPs may skip the account opening fee but charge a re-
opening fee for the account. Account holders are also subject to a service tax.

 No opening balance is required for a demat account.

Supporting documents to open a demat account

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 Passport-size photograph
 Proof of identity, address and date of birth

 DP-client agreement on non-judicial stamp paper

 PAN Card

 The applicant receives an account number and a DP ID number which are required for all
future communication with the DP.

NRI Demat Accounts

NRIs need to fill in “NRI” in the type and “repatriable or “non-repatriable” in the
subtype on the form. No special permission from the RBI is required by NRIs to open a
demat account, though specific cases may require authorization from the designated
authorised dealers.

NRIs require separate demat accounts for securities under the foreign direct investment
(FDI) scheme, which is repatriable; and the Portfolio Investment Scheme and Scheme
for Investment which can be either repatriable or non-repatriable. Repatriable and
nonrepatriable securities cannot be held in a single Demat account.

Resident Indians can continue to hold non-repatriable demat accounts they hold even
after they acquire non-resident Indian status. However, when a NRI returns to India
permanently, he must inform his designated authorised dealer of his new status, and a
fresh account would have to be opened. The securities held in the NRI Demat account
would have to be transferred to the new resident demat account, and the NRI Demat
account closed. The Demat account would have to be linked with the NRI’s NRO
account for non-repatriable accounts and NRE accounts for repatriable accounts to credit
dividends and interest.

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 4.5 PAN CARD FOR NRI

For all Indian citizens who are liable to pay tax under the Income Tax Act, 1961, or
are required to enter into financial transactions in India, it is mandatory to have a
Permanent Account Number.

The Permanent Account Number (PAN) is a combination of 10 alphanumeric numbers

issued by the Income Tax Department. The Department has entrusted UTI Investor
Services Ltd. (UTIISL) with the task of managing IT PAN Service Centers wherever
the IT department has an office in the country. The National Securities Depository
Limited (NSDL) has also been engaged to allot PAN cards from TIN Facilitation
centers.

Applying for a PAN

Form 49A, which is the application form for a PAN, can be downloaded from the Income
Tax, UTIISL and NDSL websites: www.incometaxindia.gov.in &
www.utiisl.co.intin.nsdl.com

The forms care also available at the IT PAN Service Centers and TIN Facilitation
Centers. A “tatkal” or priority service has been provided for, to enable speedy allotment
of the PAN card through the Internet. The PAN is allotted through e-mail on priority in 5

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 days as against the normal15 days to the applicant upon online payment through a credit
card. The PAN has lifetime validity.

The necessity for a PAN Card to NRIs

Apart from income returns which must carry the PAN, it is mandatory to submit the
PAN in all financial transactions, like the purchase and sale of property in India,
payments for purchase of vehicles, foreign visits, securing a telephone connection or
making time deposits in a bank worth over Rs.50,000.

For NRI’s, PAN is necessary to conduct monetary transactions in India, invest in stocks,
and pay tax on their Indian income.

The application for a PAN must be accompanied by:

 a recent colored photograph of size 3.5 cms x 2.5 cms on the application form .

 A proof of residence and identity (attested school

leaving/matriculation certificate/degree/credit card/voter
identity/ration/passport/driving license/telephone/electricity bill/employer certificate .

 code of the concerned Assessing Officer of the IT Department obtainable from the IT
office where form is submitted .

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 05. CASE STUDY ON NRI BANKING

Increasingly at Personal we are meeting Indians living abroad who are relocating to
India. Usually such individuals have a significant portion of their assets in the foreign
country; investments in India are usually linked to inheritance or savings made before
shifting abroad

The task we are entrusted with is to help such individuals plan their finances. Here's how
we assisted one such family.

We recently met a Person of Indian Origin (PIO) who was based in the United States (US);
he has now shifted permanently to India. Let's call this individual Rajeev.

Almost all of rajeev's savings are in the US; in US mutual funds and bonds. He has no
exposure to India in his asset allocation, although he does expect to inherit some Indian
assets over time.

 More about Rajeev -

 He is 44 years of age and was settled in US for many years before relocating to India

He is married and has a 8-yr old daughter

Although he is not sure, there is a livelihood that his daughter might want to go back to
US for further studies

 Rajeev's investment details are as follows:

His combined investment in stocks and funds in the US accounts for 50% of his net
assets. Remaining 50% of his investments are in short-term deposits, again in the US.
Important to note that he does not own any residential property, either in the US or in
India.

As mentioned earlier, since the client is now settled in India, and is certain to be here for
the rest of his life, in our view, it makes sense to shift his assets back to India. Why do
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 we say that? Well, if you know you are going to be in India, and all your future incomes
and expenses are going to be in Indian Rupees, why take on the risk of being invested
in US Dollars? In case the US Dollar were to depreciate vis-a-vis the Rupee, the value
of your US assets would effectively erode. This is not to say that no one should have
money invested in other currency assets. From our perspective, one should evaluate such
investment opportunities only when one has completed their investment plans for
domestic assets. Importantly, you should have that much money in another currency
asset that is required to meet future needs (that need to be provided for in the other
currency).

In order to reallocate his assets, Sanjeev will need to liquidate his assets in the US and
transfer the proceeds to India. Since his daughter might go back to US for higher
education in future he will require money (US Dollars) at that point of time. Therefore,
in his case, the liquidation and then allocation of assets must be based on his needs in
India as well as in the US.

Keeping this in mind we proposed to conduct his entire financial planning exercise in
two phases. The first phase involved understanding of his needs in India and the US and
accordingly liquidating his investments. The second phase involved, investing the
proceeds in India.

 Liquidation process:
We first started with liquidation of his investments in US, and for this, demarcating his
needs in India and US became the starting point for us. Since the client has no prior
investments in India, it gave us a good opportunity to define a well-diversified portfolio
for him.

The next step was to decide the quantum of investment to be liquidated based on his
needs. In US, he has to continue with some of his investments for his daughter's future
education. We found that around 10% of the client's total wealth will be sufficient for
this purpose and rest he can liquidate. Thus, we advised him to liquidate 90% of his total
investments in US.

The next step was to transfer the proceeds to India. Normally, people who have foreign
currency (in this case US Dollar) get apprehensive about the exchange rate at which
their proceeds are to be transferred. In this particular case, since the client is already

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 settled in India, we advised him not to pay much heed to the exchange rate and instead
start transferring the funds.

 Asset allocation based on the client's needs in India:

Given that the client has no investment in property (he was living in a rented premise),
the top priority was to invest in a property. About 40% of his assets were allocated for
the purpose. Given the hype about property, Sanjeev was keen to consider a higher
exposure; however we recommended otherwise. In our view, and this holds true for most
individuals, the number of properties you own should be linked to your 'real' needs i.e.
property which you need to give as inheritance or property for self use.

The fact that the client is financially very sound and in a position to take some risk, we
recommended that he invest upto 35% of the surplus in well-managed diversified equity
funds in a disciplined manner based on his needs and objectives. The portfolio consisted
of no more than six schemes.

Equities as an asset class are best equipped to generate high returns over longer time
frames (3-5 years). Thus, his investment in equities should be well equipped to cater his
future needs such as his daughter's marriage, his retirement planning or any other need
as and when required.

Another 10% of the surplus cash inflows could be invested in debt funds (short-term
debt funds, as at present interest rates are on the rise). Inclusion of debt funds in the
portfolio will ensure that the portfolio becomes well diversified across asset classes. The
balance (5%) could be maintained in liquid assets for any immediate requirement or for
contingency.Rajeev was also advised to take up a term insurance policy for himself.
This is a pure risk cover plan that enables the individual to opt for a high insurance cover
at relatively lower premiums.

It goes without saying that our recommendation to Rajeev (although very critical) was
just a starting point. First and foremost, it needs to be executed (investing in mutual
funds, buying property) and then the plan needs to be monitored regularly. This is
necessary as over time, Rajeev's risk profile will change, as he gets older, he may not be
comfortable with a higher allocation to equity, so a portion of his money will have to be
shifted to lower risk assets. Also the performance of the mutual fund schemes will have
to be monitored. Given the nature of the task, it is best for Rajeev that he engages the
services of a professional and competent financial planner who can actively monitor his
financial plan .

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 06. CONCLUSION

NRI Banking today stands as one of the most profitable business for banks. With India
having one of the largest NRI populations and a very prosperous one too, NRI banking
is one of business no bank can afford to ignore today. India needs foreign exchange
reserves for its developing economy. Realizing this, banks are shaping up their strategies
in order to attract this NRI money. Further with India pushing for Capital Account
Convertibility, and the success of Pravasi Bharatiya Diwas, prospects for NRI banking
has never been so good than today.

NRI Banking is becoming popular among the Non-resident customers. As India is

showing progress more & more NRI investing in the country. Banks should try to give
their top class service to the NRI’s as they are looking for convenience, speed, high yield
on investments with manageable risk, reasonable cost & quality services.

Bank should lower the minimum balance requirement which is Rs.50,000 for NRI,s as
compared to resident who have to keep Rs.1,000. The documentation procedure in case
of opening of a/c in banks, investing in any property, for buying shares & debt should
be reduced and in case of loan at a faster speed.

The services of banks should be fast, accurate & upto the standard as they have to face
competition not only from the local banks but also from the banks based overseas.

Banks should also extend their services by providing ATM’s abroad, E -banking with
efficient facility & balance inquiry message through mobilizes.

Investment of NRI would help to bring more inflow of foreign exchange through taxes
& investment policy & this would help Indian government to repay its debt to the World
Bank. Indian government should give their best services &

Efforts to encourage NRI to invest in India. This would help our economy to flourish &
grow in future.

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 BIBLIOGRAPHY

 Books/Journal
 NRI Banking in India
 Articles in Newspapers

 Libraries referred
 College library

 Website
 www.google.com
 www.icici.com
 www.wikipedia.com
 www.scribd.com

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