You are an NRI and want to open an NRI Bank Account. You search the web for information on NRI Accounts and you are over whelmed. Don’t know where to start. Here we summarize the most basic info you will need to open an NRI account. You have to answer only two basic questions. Namely, what I need the NRI bank account for and what type of NRI account will fulfill my needs. Once you got the answer for these two questions you can go ahead and compare the various banks to get the best deal. I will go through the list of answers you may come up with. You can match the best scenario that meets your banking needs.
Scenario One: I just want a basic no frills NRI bank account where I can put my money so that once I return back I can spend it. I may also want to have a resident Indian as joint account holder.
NRO is the answer. NRO is the ordinary non resident account in rupees. What does that mean? It is equivalent to the basic bank account that resident Indians can have. The difference is that it is held by a non-resident Indian. Money that you deposit is held in Indian Rupees. Interest is accrued over it but just like ordinary bank accounts you have to pay tax on the interest earned. This tax is deducted at source so don’t worry about filling tax forms. You can’t repatriate the amount outside India. By repatriate I mean you can’t convert it to foreign currency and send it outside the country. Once you return back to India and become resident you can convert NRO account to normal resident account.
Scenario Two: I want a NRI Bank account where I save my money but there is some chance that I may need my money back outside India. I am not concerned with joint account with a resident Indian. NRE is the answer. With non resident external account you are able to repatriate your money outside India. You get better interest rates than an NRO account. Moreover there is no tax deducted on the interest you accrue. Limitation is that you can’t have a joint account with resident Indian. Although you as a Non-Resident account holder can grant a power of attorney to any residents in India for operating their NRE Accounts in India. Power of attorney holder can make withdrawals for local payments. NRE account can also be converted to ordinary account if you return to India. NRE account is a no-brainer over NRO account if you don’t have the restriction to have a joint account with a resident Indian.
Scenario Three: I want to keep my funds in an NRI bank account but I am worried about Indian rupee getting stronger. That will diminish the value of my funds in case I decide to get the money back outside India.
FCNR is the answer. Foreign currency non resident’s account holds your funds as it says in foreign currency. You have to nominate currency say GBP or US dollars in which you want to maintain your account. Any interest or repayments to you will be made in the nominated currency. You can still ask for repayment in Indian rupees which will be calculated on prevailing exchange rate. These are not normal bank accounts but more of fixed deposits which are held for a specified period. Any withdrawal before that period may incur penalty. Just like NRE account power of attorney can be given to a resident Indian to operate a FCNR bank account. As FCNR account is maintained in foreign currency any fluctuation of Indian rupee doesn’t have impact on the value of your funds. And added advantage is a better interest rate over other types of accounts most of the times.
