BANK ACCOUNTS OF NON RESIDENTS

TYPES OF NON-RESIDENT BANK ACCOUNTS

Bank Accounts of non-residents may be classified on the basis of: -

• Repatriation facility, and
• Currency of account

On the basis of repatriation facility, there shall be two types of accounts namely ordinary accounts without any repatriation facilities and external accounts will full repatriation right. On the basis of currency of account, non-residents can maintain their accounts either in Indian rupees or in designated foreign currencies.

The non-repatriable account is the Non Resident Ordinary Account (NRO), though the interest is repatriable after the correct tax is paid thereon.

The NRI related accounts with repatriation rights that can be maintained in India are:-

a) Non Resident External Rupee Account (NRE) maintained in Indian rupees

b) Foreign Currency Non-Resident Account (FCNR) maintained in foreign currencies

c) Resident Foreign Currency Account

Non-Repatriable Accounts

Ordinary NRO Accounts in Rupees

It is mandatory for a person to get all his bank accounts redesignate as NRO accounts within a reasonable limit when he becomes an NRI. Many ignore this requirement. Fresh accounts may be opened with authorised dealers or some designated post offices in India when the person is in India on holidays or short tour. The account can be freely operated by the account holder or the joint holder (who can be a resident) for bonafide transactions. The corpus in this account is understandably non repatriable but the interest thereon is, only after correct tax thereon is paid or arranged to be paid.

When the individual once again becomes a Resident in India, NRO accounts should be redesignated as resident rupee accounts.

Opening of an account

1. Any person resident outside India may open NRO account with an authorised dealer or an authorised bank for the purpose of putting through bona fide transactions in rupees without violating any of the provisions of the Act, rules and regulation made thereunder.

2. The operations on the accounts should not result in the account holder making available exchange to any person resident in India against reimbursement in rupees or in any other manner.

3. At the time of the opening of the account, the account holder should furnish an undertaking to the authorised dealer/authorised bank with whom the account is maintained that in the case of debits to the account for the purpose of investment in India and credits representing sale proceeds of investments, he will ensure that such investments/disinvestments will be in accordance with the regulation made by Reserve Bank in this regard.

NOTES

• Opening of account by individuals/entities of Bangladesh/Pakistan nationality/ownership requires approval of Reserve Bank.

• Post offices in India may maintain saving bank accounts in the names of persons resident outside India and allow operations on these accounts subject to the same terms and conditions as are applicable to NRO accounts maintained with an authorised dealer/authorised bank.

Join Accounts with Residents

The account may be held jointly with residents.

Types of Accounts

NRO account may be opened/maintained in the form of current, savings, recurring or fixed deposit accounts. The requirements laid down in the directives issued by Reserve Bank in regard to resident accounts shall apply to NRO accounts as well.

Operation of Accounts

A resident power of attorney (POA) holder can operate the NRO Account on behalf of the non-resident account holder. Regulations governing NRE account scheme specifically prohibit the resident POA holder from repatriation outside India of funds held in NRE account or make payment by way of gift to a resident on behalf of the account holder. There is no such specific prohibition in case of NRO account scheme; however, it is advisable to approach RBI for the guidance in the matter.

There are not many restrictions on operations of these accounts and the undernoted debit and credit transactions are allowed in these accounts.

(A) Credits

(i) Proceeds of remittances received in any permitted currency from outside India through normal banking channels or any permitted currency tendered by the account-holder during his temporary visit to India or transfers from rupee accounts of non-resident banks.

(ii) Legitimate dues in India of the account holder.

(iii) Maturity proceeds of their term deposit held under NRSR Accounts Scheme may be credited to NRO account.

(B) Debits

(i) All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve Bank in this behalf.

(ii) Remittance outside India of current income in India of the account holder net of applicable taxes.

Remittance of funds held in NRO accounts

Balances in NRO accounts are not eligible for remittance outside India without approval of Reserve Bank. Funds received by way of remittances from outside India in foreign exchange which have not lost their identity as remittable funds will only be considered by Reserve Bank for remittance outside India.

(I) Remittance of assets by NRI/PIO

NRls/PIOs are permitted to remit through an Authorised Dealer, an amount not exceeding USD One million per calendar year, out of balances held in the NRO account representing the sale proceeds of assets (a) acquired in India out of rupee/foreign currency funds or (b) by way of inheritance/legacy or settlement from a person who was resident in India subject to conditions outlined below:

(a) Assets acquired in India out of rupee/foreign currency funds

(i) Immovable property

NRI/PIO may remit sale proceeds of immovable property purchased by him as a resident or out of rupee funds as NRI/PIO provided such a property was held by him for a period of not less than ten years. If such a property is sold after being held for less than ten years, remittance can be made, if the sale proceeds were held for the balance period in NRO account (Savings/Term Deposit) or in any other eligible investment to the satisfaction of authorised dealer.

(ii) Other financial assets

For remittance of sale proceeds of financial assets, there is no lock-in-period. 

(b) Assets acquired by way of inheritance/legacy or settlement

For remittance of sale proceeds of assets, both financial and immovable property acquired by way of inheritane'e/legacy or settlement from a person who was resident in India there is no lock-in­-period. NRI/PIO may submit to the satisfaction of Authorised Dealer documentary evidence in support of inheritance/legacy or settlement.

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

A citizen of a foreign state not being a citizen of Pakistan, Bangladesh, Nepal or Bhutan who: ­

(i) has retired from an employment in India, or

(ii) has inherited assets from a person who was resident in India, or

(iii) is a widow resident outside India and has inherited assets of her deceased husband who was an Indian citizen resident in India.

may remit an amount up to USD One million, per calendar year, on production of documentary evidence in support of acquisition, inheritance or legacy of assets to the authorised dealer.

(III) Restrictions

The facility of remittance of sale proceeds of immovable property to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan is not available.

The facility of remittance of sale proceeds of other financial assets is not available to a citizen of Pakistan, Bangladesh, Nepal and Bhutan.

Change of Residential Status

(i) Bank Account

(a) From Resident to Non-resident

When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment, or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as a Non-Resident (Ordinary) account.

(b) From Non-resident to Resident

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

(ii) Loans/Overdrafts

In case of person who had availed of loan or overdraft facilities while resident in India and who subsequently becomes a person resident outside India, the authorised dealer may at his discretion and commercial judgement, allow continuance of the loan/overdraft facilities. In such cases, payment of interest and repayment of loan may be made by inward remittance or out of legitimate resources in India of the person concerned.

The amount due/payable to non-resident nominee from the account of a deceased account holder, shall be credited to NRO account of the nominee with an authorised dealer/ authorised bank in India.

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

NRO account (current/savings) can be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. The balance in the NRO account may be converted by the authorized dealer into foreign currency for payment to the account holder at the time of his departure from India provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon.

REPATRIABLE ACCOUNTS

Non Resident (External) Rupee Account (NRE Accounts)

NRIs and PIOs, are eligible to open NRE Accounts. These are rupee denominated accounts. Accounts can be in the in the form of savings, current, recurring or fixed deposit accounts. Accounts can be opened by remittance of funds in free foreign exchange. Foreign exchange brought in legally, repatriable incomes of the account holder, etc. can be credited to the account. Joint operation with other NRIs/PIOs is permitted. Power of attorney can be granted to residents for operation of accounts for limited purposes.

The deposits can be used for all legitimate purposes. The balance in the account is freely repatriable. Interest is lying to the credit of NRE accounts is exempt from tax in the hands of the NRI.

Funds held in NRE accounts may be freely transferred to Foreign Currency Non Residents (FCNR) accounts of the same account holder. Likewise, funds held in FCNR accounts may be transferred to NRE accounts of the same account holders.

Opening of An Account

Persons of Indian nationality or origin resident abroad may open, with authorised banks in India, Non-resident (External) Accounts (NRE Accounts), designated in rupees. These accounts can be maintained in the form of savings, current or term deposit accounts. Opening of NRE Accounts jointly in the names of two or more non-residents is permitted provided all the account holders are persons of Indian nationality or origin. For opening these accounts, the funds are required to be remitted to India through any bank from the country of residence of the prospective account holder.

The account holder has to furnish an undertaking on the account opening form that he would promptly send intimation to his bank if and when he returns to India for permanent residence.

Advantages

Non-residents can enjoy the following advantages by maintaining NRE Accounts:

(1) Term deposits for one year and above made by non-residents carry interest at rates higher than those available to residents in India.

(2) The interest on deposits and any other income accruing on the balances in the accounts are free of Indian Income-tax.

(3) The balances in the accounts are free of Wealth­-tax as well.

(4) Gifts to persons other than relatives over and above Rs.25,000 in a year would be taxable in the hands of the recipient. Exemptions are provided for gifts on occasion of marriage, or in contemplation of death or order a will or by way of inheritance.

(5) The entire credit balance (inclusive of interest earned thereon) can be repatriated outside India at any time without reference to Reserve Bank.

(6) Local disbursement from the accounts can be made freely.

(7) Purchase of Units of Unit Trust of India (UTI), Mutual Funds, Central and State Government securities and National Plan/Savings Certificates can be made freely from the balances in these accounts.

(8) Sale proceeds/maturity proceeds/repurchase price of Units of UTI, securities or certificates originally purchased out of the funds in the accounts can be freely credited to these accounts by banks, without reference to Reserve Bank.

(9) Account holders are supplied special series of cheque leaves for operation on these accounts.

(10) Account holders can avail of loans/overdrafts from banks against security of fixed deposits from out of their NRE accounts.

Types of Accounts

All types of accounts, viz. current, savings and term deposit, etc., can be opened under Non-Resident (External) Accounts Scheme.

A Non-resident can open a joint account with other non­resident provided all the account holders are persons of Indian nationality or origin.

Opening of a joint account by a non-resident person with a person resident in India is not permitted under NRE Scheme.

Non-resident account holders can grant power of attorney or such other authority to residents in India for operating their NRE Accounts in India. Such authority is however, restricted to withdrawals for local payments and remittance to the account holder himself. In cases where the account holder or a bank designated by him is eligible to make investment in India, the Power of Attorney holder is permitted by the AD/bank to operate the account to facilitate such investment. RBI has permitted banks/authorised dealers to allow remittance abroad to the non-resident account holder by his constituted attorney under a specific power in this regard. The resident power of attorney holder cannot repatriate funds held in accounts outside India under any circumstances (other than to the account holder himself) or make payment of gifts on behalf of the account holder, or transfer funds from the said account to another NRE account.

Such account can also be opened by an eligible non­resident Indian during his temporary visit to India, against tender of foreign currency traveller cheques/currency notes, provided the bank is satisfied that the prospective account holder has not ceased to be a non-resident. The amount so tendered would be endorsed on the Currency Declaration Form (CDF) where applicable, before crediting the rupee equivalent to the account.

The initial deposit in NRE account can be made in any of the following manners ­

• By proceeds of foreign exchange remittances from abroad through banking channels in an approved manner.

• By proceeds of foreign currency notes and traveller cheques brought into India by non-resident while on a temporary visit to India.

• By transfer from an existing Non-Resident (External) FCNR account of the same person.

Operation of Accounts

There are certain restrictions on operation of NRE accounts and Form A2/ A4 are to be completed for a few transactions. These forms may be completed either by the resident party to the transaction or by the bank after obtaining necessary information from the resident party account holder.

Credits in the account, i.e. amounts that can be deposited into the account

Transaction where Form A4 is not to be completed:

• Proceeds of remittances to India in any permitted currency.

• Transfer from FCNR accounts of the same account holder.

• Interest accruing on balances in Non-resident (External) or FCNR accounts of the account holder.

Transactions where Form A4 is to be completed.

• Proceeds of foreign exchange remittances, drafts, personal cheques, etc., in the name of the account holder.

• Proceeds of foreign currency travellers, cheques, drafts and personal cheques drawn by account holder on a foreign currency account maintained abroad by him (including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency or in rupees from the account of a non-resident bank) deposited by account holder during his temporary visit to India; provided authorised dealer is satisfied that the account holder is still ordinarily resident abroad, the travellers' cheques/drafts are standing in the name of account holder and have not been endorsed in his favour and in the case of travellers' cheques, they are discharged by the account holder in the presence of the bank officials.

• Proceeds of foreign currency/bank notes tendered by account holder during his temporary visits to India, provided these are tendered to authorised dealer in person by account holder himself and the authorised dealer is satisfied that account holder is still ordinarily resident outside India. .'

NOTES

• Purchases of travellers, cheques/currency notes/ bank notes made in terms of (ii) and (iii) above should be endorsed on the reverse of Currency Declaration Form (CDF), wherever applicable. A photocopy of CDF should be kept on record by authorised dealer.

• Foreign currency notes/bank notes and travellers' cheques tendered by Power of Attorney holder of any person other than account holder, should not be credited to NRE Account.

• Form A4 is to be completed only for transactions of Rs. 1,00,000 or above.

Other Credits

• Refund of share/debenture subscriptions to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from other NRE/FCNR account of the account holder or by remittances from outside India through normal banking channels.

• Refund of application/earnest money/purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/plot/cancellation of booking/deals for purchase of residential/commercial property together with interest, if any (net of Income Tax payable thereon), provided the original payment was made out of NRE/FCNR account or remittance from outside India through normal banking channels.

• Current Income like rent/dividend, pension, interest, etc., of NRI can be credited to NRE Account by authorised dealer, if the credit represents current income of the NRI account holder and income tax thereon has been deducted/paid/provided for, as the case may be. If NRI/PIOs do not have a taxable income in India, then a simple declaration, in duplicate, from the NRls/PIOs to the effect that he/ she is not a tax-payer in India, is to be submitted to the authorised dealer.

Debits in the account, i.e. amounts that can be withdrawn from the account.

Transactions where Form A4 is not to be completed.

•  All local payments except for purposes of investment.

•  Transfer to any other NR(E) or FCNR account of the same person.

•  Transfer to NR(E) accounts of persons other than the account holder for bona fide personal purposes. ,

• Transactions where Form A4 is required to be completed. ,

• Payments for permissible investments by the account holder.

• Payments towards purchase price of immovable property by account holder.

• Any other transaction if covered under general or special permission granted by Reserve Bank.

NOTES

Form A4 is required to be filled in and retained for scrutiny by auditors of banks.

Transaction required to be reported on Form A2

• Remittances abroad.

• Sale of foreign currency, traveller cheques etc. to account holder himself or his requiring provided that they hold a ticket showing journey date which should not be later than thirty days from the date of sale.

All other transactions of credit/debit to these accounts not covered under the above provisions required prior approval of Reserve Bank. Form A4 is to be completed in duplicate in such cases and forwarded to Reserve Bank through the bank with whom the account is maintained. The transaction will be put through the account only after a copy of Form A4 duly approved by Reserve Bank is received back by bank.

Change of Status from Non-resident to Resident.

Immediately upon return of account holder to India and on his becoming resident in India, NR(E) account will be redesignated as resident rupee account or converted to RFC account at the option of the account holder .

However, if the account holder is only on a short visit to India, the account will continue to be treated as NR(E) account even during his stay in India.

In respect of funds held in fixed deposits in NR(E) Accounts, interest will be payable at the rate originally fixed, provided the deposit is held for the full term, even after conversion into resident account.

International Credit Cards

NRI/PIOs can be issued international credit cards provided the charges for the use of the card are by way of inward remittances from balances in NRO/NRE/FCNR(B) Accounts.

Disadvantages of NR(E) Accounts

• NR(E) accounts are opened in Indian rupees and all foreign exchange remittances received for credit of those accounts are first converted into Indian rupees at buying rates by banks. Any withdrawal in foreign currency will be permitted by bank by converting Indian rupees in the account into foreign currency at selling rate, at the cost/loss of account holder.

• Exchange rates are subject to fluctuation on day-to-day basis and Indian rupee has depreciated against all major foreign currencies in recent past. Balances held in Indian rupees in NRE accounts are thus exposed to exchange. fluctuation risk.

Foreign Currency (Non-Resident) Account Bank Scheme (FCNRB)

Introduction

NRIs/PIOs are permitted to open such accounts in US dollars, Sterling Pounds, Japanese Yen ,Euro, Canadian Dollars and Australian Dollars. The accounts may be opened in the form of term deposit for any of the three maturity periods viz; (a) one year and above but less then two years.(b) two years and above but less then three years. and (c) three years only. Now RBI has allowed banks to accept FCNR(B) deposits upto maximum period of five years.

Interest income is tax free in the hands of NRI until he maintains a non-resident status or a resident but not ordinarily resident status under the Indian tax laws.

FCNR (B) accounts can also be utilised for local disbursement including payment for exports from India, repatriation of funds abroad and for making investments in India, as per foreign investment guideline.

NRIs are eligible to open and maintain these accounts with authorised dealer. However, opening of FCNR(B) accounts in names of NRIs f Bangladesh/Pakistan nationality/ownership require approval of Reserve Bank.

Types of Accounts

FCNR(B) account can only be opened in the form of term deposits. The deposits are accepted for the terms not exceeding five years.

The rate of interest on funds held in these deposit accounts will be in accordance with the directives issued by Reserve Bank from time to time.

A non-resident can open a joint account with the other non-resident provided all the account holders are persons of Indian nationality or origin.

Opening of a joint account by a non-resident with a person resident in India is not permitted.

Opening of Accounts

(1) Accounts can be opened with funds remitted from outside India through normal banking channels or funds received in rupees by debit to account of a non-resident bank maintained with authorised dealer in India or funds which are of repatriable nature in terms of regulations made by Reserve Bank.

(2) Accounts can also be opened by transfer of funds from existing NRE/FCNR accounts. 

(3) Remittances from outside India for opening of or crediting to these accounts should be made in the designated currency in which the account is desired to be opened/maintained.

Without prejudice to the above, if the remittance is made in a currency other than designated currency (including funds received in rupees by debit to account of a non-resident bank), it should be converted into the latter currency by authorised dealer at the risk and cost of the remitter and account should be opened/credited in designated currency only.

(4) In case depositor with any convertible currency other than designated currency desires to place a deposit in these accounts, authorised dealers may undertake with the depositor a fully covered swap in that currency against the desired designated currency, such a swap being possible between any two designated currencies.

(5) Where the funds are received in Indian rupees for opening these accounts shall be converted by authorised dealer into designated foreign currency at clean T.T. selling rate for that currency ruling on date of conversion.     

Designated Currencies

Deposit of funds in accounts may be accepted in Pound Sterling, Japanese Yen, US Dollar, Euro, Canadian Dollar, Australian Dollar and such other currencies as may be designated by Reserve Bank from time to time.

Operations of Accounts

(i) Debits in Accounts

All debits as permissible under NRE Account scheme are also permissible from this account.

(ii) Credits in Accounts

(a) All the credits as permissible under NRE Account scheme are also permissible from this account

(b) The maturity proceeds of NRNR deposits credited to NRE Account can also be subsequently transferred to FCNR(B) Account.

(c) Non-Resident Indians/Persons of Indian Origin can credit refund of application/earnest money/purchase consideration made by the housing building agencies/seller on account of non-allotment of flat/plot/cancellation of bookings/deals for purchase of residential, commercial property, together with interest, if any (net of income tax payable thereon), to NRE/FCNR account, provided, original payment was made out of NRE/FCNR account of account holder or remittance from outside India through normal banking channels and authorised dealer is satisfied about genuineness of the transaction.

(iii) Maturity proceeds of deposit

Principal Amount and Interest will be payable in the same designated currency. The depositor, thus, will not be exposed to any exchange risk fluctuation. The depositor will have option to convert the foreign currency amount of designated currency into any other convertible currency at appropriate rate of exchange. For the purpose of payment in rupees, the amount shall be converted at the clean T.T buying rate ruling on the date of withdrawal.

(iv) Interest

Interest is payable either half-yearly or on annual basis at option of the depositor. Interest can be either credited to a new FCNR(B) Account or his existing/new NREINRO Account.

Change of resident status of account holder

When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at contracted rate of interest, if so desired by him. However, except the provisions relating to rate of interest and reserve requirements as applicable to FCNR(B) deposits; for all other purposes such deposits shall be treated as resident deposits from the date of return of the account holder to India. Authorised dealers should convert the FCNR(B) deposits on maturity into resident rupee deposit accounts or RFC account (if the depositor is eligible to open RFC account), at the option of the account holder and interest on the new deposit (rupee account or RFC account) shall be payable at the relevant rates applicable for such deposits.

Miscellaneous

The terms and conditions as applicable to NRE accounts in respect of joint accounts, repatriation of funds, opening account during temporary visit, operation by power of attorney holder, loans/overdrafts against security of funds held in accounts, shall apply mutatis mutandis to FCNR (B) accounts.

RESIDENT FOREIGN CURRENCY ACCOUNTS (RFC)

Any person who has been an NRI is eligible to open an RFC account, irrespective of the period for which he enjoyed the status. The funds in RFC shall be free from all restrictions regarding utilization of foreign currency balances including any restriction on investment in any form, by whatever name called, outside India. The most important aspect of RFC is that the account holder can freely repatriate the entire or part of balance as desired by him.

However, the utility of RFC has been much diluted ever since the Residents are allowed to purchase legally sufficient foreign exchange (FE) for bona fide reasons. Moreover, NRIs are allowed to continue to hold bank accounts and investments abroad.

Main Features

• The scheme is available to NRIs returning only from External Group of countries

• RFC can be opened and maintained in any convertible foreign currency.

• The account can be held singly or jointly, though nomination facility is available.

• RFCs can be maintained in the form of current or savings or tern deposits.

• No loans or overdrafts will be permitted in these accounts.

Permissible Credits

• FE balances repatriated from abroad.

• Incomes or sale proceeds from FE assets held abroad.

• Sale proceeds of FE Assets held in India sold.

• Pension, superannuation or other monetary benefits from ex-employer outside India.

• Transfer from NRE and FCNR balances.

• Proceeds of foreign currency notes and foreign travelers' cheques brought in by the account holder.

• Transfers from other RFC accounts of the account holder.

• Interest earned on RFC accounts.

• Recredit of unspent FE surrendered by the account holder on his return to India, provided that unspent

• exchange had in fact been released for travel, etc., and it is surrendered within the stipulated period. 

• Gifts or inheritance received from abroad.

Permissible Debits

• Remittance abroad for any bona fide purpose of the account holder or for his dependents. This may

• include Purchase of a foreign security. 

• Transfers to other RFC accounts of the account holder.

• All local disbursements and bank charges.

The scheme of importing gold and silver is extended to RFC and EEFC account holders.

INTERNATIONAL CREDIT CARDS (ICC) TO NRIS/PIOS

NRI/PIOs can obtain International Credit Cards without the prior approval of Reserve Bank of India. The only condition prescribed is that the charges for the use of ICC are paid out of inward remittances of balances in their NRE Accounts/Foreign Currency Non ­Resident Accounts.

However, the Reserve Bank has made further relaxation vide Circular No. 59, dated December 9, 2002 in which the NRI/PIOs are allowed to settle/debt the charges/expenses through credit card upto the limit of the card out of funds held in NRO account as well. The debits shall also be subject to the conditions for use of the International Credit Cards by residents.

NOMINATION FACILITY FOR BANK ACCOUNTS IN INDIA

The Banking Companies (Nomination) Rules, 1985 framed under Banking Regulation Act, 1949 enable banks to accept nominations. Nomination can be made by account holder or, as the case may be, by all joint account holders together, in respect of an account held by them with a bank in India. The nomination can be made only in respect of a deposit held in the individual capacity of the depositor, and not in any representative capacity as a holder of an office or otherwise. The nomination has to be made in favour of only one individual. The nominee may be a minor but in that case the account holder should, while making the nomination, appoint another individual (who is not a minor) to receive the amount of deposit on behalf of the nominee during his minority, in case of need. The nomination made can be varied or cancelled by the account holder any time during the currency of the account by filing an application in the prescribed form.

The nomination facility is also available to holders of non-resident accounts. However, in case of deposits held in FCNR and NRE accounts, the deceased account holders' nominees (who could also be residents in India) would not be automatically entitled to the right of repatriation of funds acquired by them. Similarly, credit of the amount becoming payable to a nominee to his NRE/FCNR account requires prior permission of Reserve Bank of India. In such cases, the nominees are required to make separate applications to Reserve Bank of India, which would be considered in the light of the residential status of individual nominees and the relevant Exchange Control Regulations. Utilisation of the funds in India by the nominees would not, however, need exchange control approval.

The forms prescribed for deposit accounts under Nomination Rules are DA 1 for nomination, DA 2 for cancellation and DA 3 for variation.

QUESTIONS AND ANSWERS

Q.1 Can an NRI account be opened in the name of crew members of shipping companies?

 Ans. NRI accounts can be opened in the name of crew members of shipping companies if their posting is not based in India and they derive their income from abroad in foreign currency.

Q.2 Shipping crew members visit. India and sometimes they are on vacation for family reasons for four to six months or more. In which case what will be their status? Are they resident or non­resident and are their bankers obliged to ascertain their status?

Ans. Bankers are under no obligation to ascertain the number of days the NRI is in India, and it is for the NRI to inform his bankers about any change in his status. Further, the purpose of stay in India is material t6 define an NRI as per FEMA. Therefore, as long as the person is gainfully employed outside India and is only on a long leave in India for reasons of family convenience (where admittedly his stay in India would be for a specific or certain duration), he will continue be an NRI for purposes of his bank accounts in India.

Q.3 Can Non-residents open these accounts from abroad?

Ans. Yes. Many banks in India provide on-line account opening facility.

Q.4 Can NRO/NRE account holders obtain loans/overdrafts against their fixed deposits?

Ans. Loans to Non-resident account holders can be granted for personal as well as business purpose. The loan for the purpose of re-lending, or carrying on agricultural/plantation activities or investment in real estate business is not permitted.

Q.5 Can funds in NRE/NRO accounts be utilised for payment of airfare to and to/in India of the account holder and/or his dependents?

Ans. Banks maintaining the accounts have been authorised to permit such payments. Airlines/Shipping companies and their agents have also been permitted to accept payments in rupees from the funds held in NRO/NRE accounts for the purpose.

Q.6 Is transfer of funds between NRE accounts maintained by two different account holders permitted?

Ans. Yes. Authorised dealers can permit transfer of funds from the NRE account of one person to the NRE account of another person for bona fide personal purposes.

Q.7 Is there a limit on the number of accounts which an NRI can open?

Ans. No. An NRI can open as many NRO, NRE or FCNR accounts as he desires.

Q.8 Can a foreign shipping or airline company open a foreign currency account in India?

Ans. A shipping or airline company incorporated outside India or its agent in India may open, hold and maintain a Foreign Currency Account with an authorised dealer in India for meeting the local expenses in India of such airline or shipping company.

Q.9 What kinds of credits are permitted in the foreign currency accounts of a foreign shipping or airline company or its agent in India?

Ans. Foreign shipping or airline company or its agents in India are permitted, to credit freight or passage fare collections in India or an inward remittance through normal banking channels from its office outside India, and in case of agent, from his principal outside India.

Q.10 Can an Indian Branch or liaison office of a foreign company have a fixed deposit account in India?

Ans. Recently, RBI has permitted such entities to open a term deposit account for a period not exceeding six months provided Authorised Dealer is satisfied that the term deposit is out of temporary surplus funds. The branch/liaison office also needs to furnish an undertaking that the maturity proceeds of the term deposit will be utilised for its business in India within three months of its maturity.

However, branch/liaison offices of foreign shipping/airline companies are not allowed such a facility.