Types of Bank Accounts for NRI – Opening an NRI Account

A non-resident Indian is a person of Indian origin who resides outside India. A person with NRI status can access banking services offered by the authorized banks in India as per the RBI guidelines. 

According to the RBI regulation, an NRI cannot operate a regular saving account in India, and it is mandatory for the NRI to either convert the existing account into an NRI account or open a new one. Having an NRI account is necessary for carrying out financial transactions in India. An NRI individual can use such accounts to transfer foreign earnings to India, maintain Indian earnings, and invest in the Indian market.

NRI Account

This is a banking account opened in an authorized Indian bank or Indian affiliate bank by a person of Indian origin who does not currently reside in India.

There are different types of bank accounts that cater to various requirements of an NRI, including banking and investment needs:

• NRE Account
• NRO Account
• FCNR Account

NRE (Non-Residential External) Account

An NRE account is used to keep and manage foreign earnings in India. With this account, you can transfer funds in a foreign currency that is fully repatriable. The deposited amount is converted into Indian rupees. This facility allows you to deposit funds in foreign denominations and withdraw them in Indian rupees. Such a bank account is primarily used for personal banking needs and making investments in India.

Benefits of an NRE Account:

• Repatriation Benefit

You can transfer your principal and interest amount kept in an NRE account to a foreign account without any restrictions.

• Tax Benefits

In India, the principal amount and interest earned on such accounts are exempt from taxation. 

• Investment

You can link your trading account with an NRE account that allows you to invest money in the Indian market.

• Joint Account Opening

An NRE account can be opened jointly with another NRI or an Indian resident family member on a former or survivor basis.

NRO (Non-Resident Ordinary) Account

An NRO account is used to manage Indian earnings like rent, salary, and dividends. This is also a rupee-dominated account. In a fiscal year, the account holder can repatriate up to USD 1 million. The interest earned from the NRO account is taxable under Indian law. The tax percentage depends upon the income tax rate for the particular slab.

A person with NRI status can convert their account to an NRO account after submitting the required documents.

Benefits of the NRO account:

• Park Indian Earnings

You can park the Indian earnings that you had before moving to an international location.

• Easy Transfer of Funds from NRE Account or Overseas Account

You can easily transfer your money from an NRE account or an overseas account to this one. This account is best for those who own assets and earnings in India before moving overseas.

• Investment

An NRO account holder can seamlessly invest in mutual funds and other investments in India. 

• Joint Account Opening

An NRO account holder can open a joint account with another NRI or an Indian resident family member on a former or survivor basis.

Foreign Currency Non-Residents (FNCR) Account

This NRI account is different from the NRO or NRE account. This account is used to deposit foreign earnings and keep them in the currency of the resident country. The tenure range of FNCR accounts varies from a minimum of 1 year to a maximum of 5 years. There are multiple options for currency, such as the US Dollar and Pound Sterling. This account is best suited to protect the earnings from exchange rate risks.

Benefits of the FNCR account:

• Tax Rebate

The interest earned from the FNCR account is tax-free in India.

• Repatriable 

The funds maintained in the FNCR account are repatriable. The principal as well as the interest earned can be transferred to the country of residence.

• Compound Interest 

The interest earned in the FNCR account is compounded half-yearly and payable at year-end.

• Apply for a Loan

An FNCR account holder can apply for a loan against the amount held in the account. The amount of the loan will be in Indian rupees and can be repaid to the bank.

The process of online NRI account opening is quite simple as all the authorized banks in India have their own banking apps to provide necessary banking services to their customers. 

Each account comes with its own benefits, and you can choose from these account types according to your banking requirements. Every Indian bank has certain eligibility criteria and document requirements that must be fulfilled to open an NRI account. It is important to note that you must have NRI status and foreign residential proof for a seamless account opening process. The documentation process varies from bank to bank. Before opening an account, you should look into the additional benefits offered by financial institutions.