Banks offer various facilities for an individual to store money and other valuables. Some of the prime facilities include the creation of bank accounts through which an individual can store money to gain interest, issuing of bank loans for various purposes, issuing of credit and debit cards for the interest of the individual, helping to make investments in various policies and shares to gain profits and many other such privileges. Indian banks offer cater to another sector which is known as the Non Resident Indian Accounts or NRI Accounts.
With development and educational revolution in the country many of the working Indian citizens found it a better option to move up and migrate to other parts of the world as it offered more opportunities and a better pay scale. With the increasing number of migrants every year it was seen in the annual financial budget that the revenue from banks was decreasing. In order to facilitate proper revenue from banks it was necessary to take steps and formulate rules and regulations. Thus in 1970 the Government of India set up the Non Resident Indian Account Rules which were governed by the Exchange Control of India.
According to these rules certain banks were licensed by the Reserve bank of India to create Non Resident Indian bank accounts and maintain them. This license was awarded to few authorised dealers and NRI’s could open rupee or other foreign currency accounts in these banks. Certain regional banks were also allowed to create bank accounts for the Non Resident Indians but these were only allowed to open rupee accounts. Foreign currency accounts were allowed only with authorised dealers who were licensed by the Reserve Bank.
Based on the rules set down by the Foreign Exchange Act of India the NRI’s are allowed to open either rupee accounts or foreign currency accounts.
Based on these requirements three investment schemes or deposit schemes are possible. They are
Non Resident (External) Rupee Account for all NRI’s
Non Resident (Ordinary) Rupee Account for all NRI’s
Foreign Currency Non Resident (Bank) Account for all NRI’s
These investment schemes differ and the NRI can choose one that best suits his or her taste.
The FCNR (B) Scheme is validated only by authorised dealers who have been licensed by the Reserve Bank of India. Foreign currencies like US Dollars, Pounds, Yen, Deutsche Mark, Sterling Pounds and other such major currencies can be maintained in these accounts. It can only be credited as a term deposit. These can be remitted to foreign accounts when needed. The rate of interest is subjected to a cap and must not cross an indicated mark.
The NRE and NRO accounts can be credited as savings deposits, fixed deposits, recurring deposits etc. the rate of interest for NRE is also subjected to cap and it should not exceed an indicated mark. For NRO accounts the interest rate is calculated depending on the bank in which it is credited. Money can be remitted to foreign accounts with NRE accounts. NRO accounts can only be used to make local payments and expenditures. Money that is not permitted for transfer to foreign banks under the foreign exchange act is to be credited to these NRO accounts.
NRI Deposits thus have lucrative privileges and are being boost by the banks for maximum revenue.