What is an NRI Bank Account?

Varun Hariharan

23 Nov, 2020

NRI Bank Account is opened by an individual who is a resident outside India but is an Indian citizen. An NRI can open a bank account to conduct transactions within the country. There are three types of Bank Accounts for NRI. The following are:

• Non-Resident Ordinary Account (NRO)
• Non-Resident External (Savings) Account (NRE)
• Foreign Currency Non-Resident (FCNR) Fixed Deposit Account

NRO Account– This type of account allows the individual to open a bank account in India to manage the income earned by the individual from employment in India. This type of account is subjected to tax deducted at source. 

NRE– This type of account allows the individual to transfer foreign currency which is earned to India in the form of rupee denomination. This type of account is relevant where a Non-Resident Indian wants to convert foreign currency to Indian currency when the transfer is made. There is a tax exemption for this type of accounts and interest is also exempt for tax. 

Foreign Currency Non-Resident Fixed Deposit Account– This account is where an individual will keep the foreign currency in the same denomination to not get affected by the exchange rates in the country. This type of account is kept as a fixed deposit account.  The currency in this account is in the denomination of Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian Dollar and Australian Dollar.

An NRI opens these accounts for ease of conducting business in India.

For classification of NRI bank Accounts, if the person of Indian origin visited India for 120 days or more in a fiscal year and had spent more than 365 days in last four years, then such an individual will also become ‘resident’ in India. Previously to open an NRI bank account, if an individual stays outside India for more than 182 days, then such an individual is termed as an NRI.

Is an NRI Bank Account required?

Yes, a bank account is required for an NRI. It is always beneficial to open a bank account for an NRI.

• As a requirement by the law- The account must be in the form of an NRE, NRO or FCNR. While opening the bank account, the NRI must mention his/her residential status and provide documents to the bank. They cannot have a current account or a savings account. As per the FEMA regulation, it is mandatory for an NRI, to convert his/her bank account into an NRO account.
• For Investment- Some NRI Bank accounts allows the individual to earn interest on specified fixed deposit. This interest is considered as tax-free for treatment. Therefore opening an NRI bank account for investment is a credible option for an NRI.
• Income from India- NRIs invest in properties in India. For depositing the rental income from properties, NRO Bank accounts are opened.
• Having funds in Indian Rupees (INR) – Some NRIs open NRI Bank Accounts for keeping investment in the form of Indian Rupees. For this, NRIs require to open an NRE or NRO account.

Who Regulates NRI Bank Account?

The primary regulatory authority is the Reserve Bank of India (RBI). However, authorised dealers such as banks would manage transactions on behalf of NRIs. These accounts have to be compliant with the relevant Foreign Exchange Management Laws (Foreign Exchange Management Act, 1999). For tax treatment, the Income Tax Act will also apply to individual NRI Accounts.

Eligibility Criteria for NRI Bank Account

Process for Opening NRI Bank Account

• The individual/ NRI applicant has to go to the bank if they are in India for the purposes of opening an NRO/NRE account.
• Depending on the financial requirements of the individual, either an NRI or NRE account will be opened.
• Non-Resident Indian can open the following accounts

1. NRO

2. MORE

3. Foreign Currency Non-Resident Fixed Deposit Account

• Submit the requisite information regarding the account.
• The account will be opened within a period of 72 to 96 hours.

Documents required for opening an NRI Bank Account

Following documents are broadly required if you wish to open an NRE/NRO account in India.

• Photocopy of Passport.
• Photocopy of Visa.
• Proof of Address of Foreign Residence – Utility bills, photocopy of passport with foreign residence address, photocopy of a driving license or any relevant document as a proof of address to foreign residence.
• All the copies will have to be attested by the Embassy of India or any other overseas banker.
• Passport size photograph – Self-attested by signing across the photograph.
• Work Permit /Authorisation Letter for work in a foreign country
• Birth Certificate.
• Marriage Certificate.
• Valid Overseas Citizen of India (OCI) Card. 

Bank Account Validity 

There is no particular validity for an NRI Bank Account. Once the account is opened, it will be opened for an indefinite period. If there are any changes in the bank processes, then the NRI will be intimated about the changes. Alternatively, if the NRI wishes to close the bank account, then this is possible.

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