NRI BANKING CHAPTER NO TOPIC NAME PAGE NO ACKNOWLEDGEMENT EXECUTIVE SUMMARY RESEARCH METHODOLOGY OBJECTIVES OF THE STUDY SCOPE OF STUDY 05 06 07 08 08 01 INTRODUCTION ON NRI BANKING:- Who is an Nri? Pio card scheme What is an OCB? Key benefits Types of accounts Opening of NRI A/c 09 10 11 13 14 15 19 02 DEFINATION:- Definition of NRI – under Foreign Excange Management Act,1999 Defination of PIO 24 27 1
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NRI BANKING
CHAPTER NO
TOPIC NAME PAGE
NO
ACKNOWLEDGEMENT
EXECUTIVE SUMMARY
RESEARCH METHODOLOGY
OBJECTIVES OF THE STUDY
SCOPE OF STUDY
05
06
07
08
08
01 INTRODUCTION ON NRI BANKING:-
Who is an Nri?
Pio card scheme
What is an OCB?
Key benefits
Types of accounts
Opening of NRI A/c
09
10
11
13
14
15
19
02 DEFINATION:-
Definition of NRI – under Foreign Excange
Management Act,1999
Defination of PIO
24
27
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NRI BANKING
03 DEPOSITORY’S SCHME FOR NRI’S:-
NRE A/c
Types of Accounts
FCNR A/c
NRO A/c
Tax Benefits for NRI’s
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30
34
36
41
04 SERVICES OFFERED BY VARIOUS BANK TO NRI’S:-
Banking Services
Services offered by ICICI Bank
Facility available as per RBI/FEMA
guidelines
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44
45
05 RBI ISSUES GUIDELINES FOR MONEY TRANSFER SCHEME:-
Money transfer
International SWIFT transfer
Demand (or bankers) draft
UAE Exchange
Wester union Money Transfer
Sendwise
Moneygram send money online today
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49
49
50
50
50
51
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06
ICICI & HDFC bank NRI money transfer
NRI INVESTMENTS:-
Investment opportunities in India for NRI
RBI forms
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07 NRI INVESTMENT IN IMMOVABLE PROPERTY IN INDIA:-
Rules for acquisition 7 transfer by foreign
citizen NRI’s
Mode of payment
Repatriation of sale proceeds
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58
59
08 PAN CARD FOR NRIs:-
Applying for pan card, necessity for pan
card,charges of pan card
Demat a/c
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62
CASE STUDY ON NRI
CONCLUSION
ANEXXURE
FINDINGS AND SUGGESTION
BIBLIOGRAPHY
66
70
71
72
74
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ACKNOWLEDGEMENT
First and Foremost I thank the ALMIGHTY for the Inspiration and strength to complete this project report successfully.
I would firstly like to thank Prof.Parvathy Venkatesh who has provided me the kind opportunity to do this project and to finish it in a successful manner.
My heartily thanks to Mrs. Mahek Mansuri the coordinator of my group and other faculties, who have right from the beginning encouraged me to do the project well.
I consider it my proud privilege and immense pleasure working under the guidance of Ms Marelia Mam, who gave me a constant guidance valuable suggestions and inspiring encouragement to make my study a success.
My sincere thanks toms Ms Marelia Mam, who has done me the corrections and formatting of project report and helped me by providing details and quotations of
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NRI BANKING
my topic, this helped me make my project very precise and accurate to a great extent
On a personal note, I wish to thank my family members and friends for their constant support in helping me accomplish my mission
EXECUTIVE SUMMARY :-
NRI Banking is becoming popular among the Non-resident customers. As India is
showing progress more & more NRI investing in the country. Banks should try to
give their top class service to the NRI’s as they are looking for convenience, speed,
high yield on investments with manageable risk, reasonable cost & quality
services.
Bank should lower the minimum balance requirement which is Rs.50,000 for
NRI,s as compared to resident who have to keep Rs.1000. The documentation
procedure in case of opening of a/c in banks, investing in any property, for buying
shares & debt. should be reduced and in case of loan at a faster speed.
The services of banks should be fast, accurate & upto the standard as they have to
face competition not only from the local banks but also from the banks based
overseas.
Banks should also extend their services by providing ATM’s abroad, E -banking
with efficient facility & balance inquiry message through mobilizes.
Investment of NRI would help to bring more inflow of foreign exchange through
taxes & investment policy & this would help Indian government to repay its debt
to the World Bank. Indian government should give their best services &
efforts to encourage NRI to invest in India. This would help our economy to
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flourish & grow in future.
RESEARCH METHODOLOGY
In order to conduct the research an appropriate methodology became necessary.
In this direction both
primary as well as secondary data were attempted to be collected.
The methodology for collecting data with reference to the secondary data was
taken from the different published articles, books, journals, and the relevant
websites. The library of the college was of great help.The questionnaire was
initially prepared in tough sketch at the first instance. These questions were
discussed with our internal guides and our teaching faculty. They have provided
valuable suggestions, additions deletions and modification of the rough
questionnair Methodology became a preplanned strategy in collecting, editing,
tabulating and in interpreting the required information for the research.Thus
methodology relied on both primary and secondary data with the help of
questionnaires, discussions, observations as well as published work and
unpublished work
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NRI BANKING
OBJECTIVE OF THE STUDY
To get an overview of NRI BANKING SERVICES
To analyze the growth of NRI banking services
To study the innovative concepts emerging in the banking industry for NRI’s
To observe the facility provided to NRI by Indian banks
To analyse the response of the NRI given to the computerization & new
invention in an Indian banks.
SCOPE OF STUDY:-
The scope of the study is to extended the knowledge about the nri banking services
provided by banks but restricted to only ICICI Bank.
AREA :- In the vicinity of Mumbai (India) services for NRI by banks
BRANCH :- ICICI ( Industrial Credit and Investment Corporation of India)
bank Andheri branch.
TIME FRAME :- Aug 20th 2010 TO SEP 24th 2010.
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NRI Banking – An Introduction:-
As per RBI guidelines, the residential status of an Indian changes to that of the
Non-Resident, in the event of his stay abroad being more than 183 days. This
period of 183 days is not applicable in certain cases like going overseas for
employment or business. It is mandatory to inform the bank of your change of your
residential status.
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CHAPTER 1.
INTRODUCTION
NRI BANKING
With a view to attract the savings and other remittance into India through banking
channels from the person of Indian Nationality / Origin who are residing abroad
and bolster the balance of payment position, the Government of India introduced in
1970 Non-Resident(External) Account Rules which are governed by the Exchange
Control Regulations. The funds held in Non-Resident (External) Accounts (NRE
Accounts) qualify for certain benefits like exemptions from taxes in India, free
repatriation facilities, etc.
NRI banking facilities are available to NRIs and PIOs.
WHO IS A NON – RESIDENT INDIAN [NRI] ?
A Non Resident Indian (NRI) as per FEMA 1999 is an Indian citizen or Foreign
National of Indian Origin resident outside India for purposes of employment,
carrying on business or vocation in circumstances as would indicate an intention to
stay outside India for an indefinite period. An individual will also be considered
NRI if his stay in India is less than 182 days during the preceding financial year.
To meet the specific needs of non-resident Indians related to their remittances,
savings, earnings, investments and repatriation, the Government of India
introduced in 1970 Non-Resident (External) Account Rules which are governed by
the Exchange Control Regulations.
"Non Resident Indian" (NRI) means an Indian citizen or a foreign citizen of
Indian origin (excluding citizens of Bangladesh and Pakistan) residing outside
India. Students studying abroad are also treated as NRIs.
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NRI BANKING
Indian citizen who stays abroad for an indefinite period on employment, business
or on any vocation is a Non-Resident. Diplomats posted abroad, persons posted in
UN Organizations and Officials deputed by PSU on temporary assignments are
also treated as Non-residents.
PIO CARD SHCEME
The Government has launched a comprehensive Scheme for the Persons of Indian
Origin-called the ‘PIO Card Scheme’. Under this Scheme, Persons of Indian Origin
up to the fourth generation (great grandparents) settled throughout the world,
except for a few specified countries, would be eligible. The Card would be issued
to eligible applicants through the concerned Indian Embassies/High
Commissions/Consulates and for those staying in India on a long term visa, the
credited to this account. Investments made from foreign funds can be repatriated
overseas, and such investments are maintained in a Repatriable Demat account.
Non-Resident (External) Rupee (NRE) Accounts
Both Principal and Interest can be repatriated/transferred out of India
Savings rate on NRE accounts is at par with savings rates in resident accounts
Term deposits can be made for 1 to 3 years.
The interest rates on (NRE) Term deposits cannot be higher than LIBOR/SWAP
rates as on the last working day of the previous month, for US dollar of
corresponding maturity plus 50 basis points.
The interest rates on three year deposits also apply in case the maturity period exceeds three years. The change in interest rate also applies to NRE deposits renewed after their present maturity period.
FCNR (B) Accounts
As in NRE accounts, both principal and interest are repatriable.
Presently, deposits can be made in 6 specific foreign currencies (US Dollar,
Pound Sterling, EURO, Japanese Yen, Australian Dollar and Canadian Dollar).
Interest rate- Fixed or floating within the limits of LIBOR/SWAP rates for the
respective currency/corresponding term minus 25 basis points (except Japanese
Yen).
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NRI BANKING
The term of deposits can range between 1 to5 years.
NRO Accounts
Only current earnings are repatriable.
Savings NRO accounts are normally operated to credit rupee income from
shares, interest, rent from property in India, etc.
In case of term deposits, banks are allowed to determine their own interest rates.
Banks can allow remittance up to USD 1 million per financial year for bonafide
purposes from balances in the NRO accounts once taxes are paid out. This limit
includes the sale proceeds of immovable properties held by NRIs and PIOs.
Resident Foreign Currency (RFC) Account
NRIs and PIOs returning to India can maintain an RFC account with an authorized
bank in India to transfer funds from their NRE/FCNR (B) accounts. Proceeds of
assets held outside India before their return to India can be credited to the RFC
account. These funds are free from all restrictions as to their utilization or in
investment in any form outside India.
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Non-Repatriable Accounts
Non-repatriable funds are those which cannot be taken out of India. These have to
be maintained in a separate bank account i.e. a Non Resident Ordinary Bank
account. Investments made from non-repatriable accounts cannot be repatriated but
have to be maintained in a Non-Repatriable Demat account. Money once
transferred from an NRE account to an NRO account cannot be transferred back to
an NRE account.
Non Resident Ordinary (NRO) Account
When a resident becomes an NRI, his existing savings account is designated as a
Non-resident Rupee (NRO) account.
The NRO accounts could be maintained in the nature of current, saving,
recurring or term deposits. NRIs can also open NRO accounts for depositing
their funds from local transactions.
The interest earned from NRO accounts is accountable to tax laws.
NRO accounts can be opened in the name of NRIs who have left India to take up
employment or business temporarily or permanently in a foreign country.
Funds from NRO accounts are not repatriable or transferred to NRE accounts
without the prior approval of the RBI.
However, NRIs, PIOs, Foreign Nationals, retired employees or non-resident
widows of Indian citizens can remit, through the Authorized Dealer, up to USD
one million per calendar year from the NRO account or from income from sale of
assets in India
OPENING OF NRI ACCOUNT
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NRI BANKING
HOW TO OPEN NRI ACCOUNTS WITH A BRANCH IN INDIA
To open an NRE account please complete the account opening form and mail it to
the branch of your choice along with ;
Passport copy
Visa/residence permit
2 photographs
initial money remittance
Your signature may be verified by anyone of the following;
Indian Embassy/consulate
Any person known to the Bank
Notary public
Any of our offices abroad
You can open
NRE Saving Bank a/c / Current Accounts
Fixed Deposits in Indian Rupees
Fixed Deposits in Foreign Currency
NRO accounts (Rupee accounts for crediting income in India )
You can authorize a resident to operate your account through a Power of Attorney or Letter of Authority
Nomination Facility available (Nominee can be a resident Indian also)
With the exception of persons of Indian origin from Bangladesh and Pakistan, all
NRIs and PIOs are eligible to maintain an FCNR account with an authorised
bank in India.
Accounts may be opened with funds remitted from outside, existing NRE/ FCNR
accounts, etc.
Remittances should be in the designated currency.
Conversion to currency other than the designated currency also permitted at the
risk and cost of the remitter.
Features of FCNR Account
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NRI BANKING
The account can be opened with funds remitted from abroad, or transferred from
an existing NRE/FCNR account.
FCNR accounts can be opened with designated currencies, which are: GBP,
USD, Deutsche Mark, Japanese Yen and the Euro.
Conversion to another designated currency is permitted at a cost to the account
holder.
Only term deposits can be maintained in FCNR accounts, in a time range of 6
months to 3 years.
As per RBI guidelines, banks are free to offer interest on FCNR deposits below
LIBOR rates, less 25 basis points for deposits between 6 months to one year,
and LIBOR rates plus 50 basis points for deposits over a year.
Banks are also free to decide on a fixed or a floating rate of interest on FCNR
term deposits.
Interest rates are reviewed periodically and determined by directives from the
Reserve Bank (Department of Banking Operations and Development).
The account holder can choose the periodicity of interest, from half-yearly to
annual payments. The interest can be credited to a new FCNR (B) account or a
NRE/NRO account.
For permissible debits and credits, the regulations for FCNR accounts are similar
to the NRE accounts.
For conversion of currencies, from designated currency to rupees and vice versa,
the day’s rate of conversion will apply.
Funds from the FCNR account are allowed to move within the country at no
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extra cost to the account holder.
For loans and overdrafts against FCNR accounts, the same conditions as the
NRE accounts apply.
In case of premature withdrawal of the FCNR Term Deposit, a penalty is levied.
Interest paid on the account is calculated at a
1% below the committed rate if accounts are closed prematurely.
However, no interest is paid on deposits held for less than 6 months, and a
penalty would have to be paid as per directives from the apex bank. The RBI
guidelines prevail on these terms, issued as and when required.
FCNR A/c after Change in Resident Status
NRI deposits such as the FCNR can continue till the maturity date at the
contracted rate of interest even after the account holder’s resident status changes
to resident Indian.
However, except for interest rates and reserve requirements of FCNR deposits,
these accounts are treated as resident accounts effective from the account
holder’s date of return to India.
On maturity, these accounts are converted to either an RFC account or the
Resident Rupee Deposit account.
As for joint accounts, the same rules as those for NRE accounts apply to FCNR
deposits too.
For repatriation of funds from the FCNR account, the same conditions as those
for NRE accounts apply.
The RBI does not provide any guarantee on foreign exchange.
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Other Features -
Reserve Bank will not provide foreign exchange guarantee.
Lending of resources mobilized by authorized dealers under these accounts are
not subject to any interest rate stipulations.
Non-Resident Ordinary Rupee (NRO) Account
Eligibility
Any person or entity residing outside India is entitled to open a NRO account
with an authorised dealer or an authorised bank for transactions conducted in
Indian Rupees.
Individuals or entities of Bangladeshi or Pakistani nationality or ownership
require approval from the RBI.
Types of Accounts
NRO accounts can be opened as current, savings, recurring or fixed deposit
accounts. The RBI determines the rate of interest on these accounts and issues
guidelines for opening, operating and maintaining them.
Joint Accounts with Residents/Non-residents
Joint accounts are permitted with resident and non-residents.
Permissible Credits/Debits -
Credits -
Remittances from outside India through normal banking channels received in
freely convertible foreign currency.
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Any freely convertible foreign currency can be deposited into the account during
the account holder's visit to India. Foreign currency exceeding USD 5000/- or its
equivalent in the form of cash has to be supported by a Currency Declaration
Form. Rupee funds must be supported by an Encashment Certificate, if they are
funds brought from outside India.
Current income earned in India, such as rent, dividend, pension or interest. Even
proceeds from sale of assets including immovable property acquired out of
rupee or foreign currency funds or through inheritance.
Debits -
All payments towards expenses and investments in India
Payment outside India of current income like rent, dividend, pension, interest
etc. in India of the account holder.
Repatriation up to USD One million, per calendar year, for all bonafide purposes
with the approval of the authorised dealer.
Remittance of Assets
NRIs and PIO may remit upto USD One million per calendar year, out of balances
held in the NRO account which could be acquired from the sale proceeds of assets
acquired in India out of rupee or foreign currency funds or by way of inheritance
from a resident Indian, provided:
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NRI BANKING
Assets acquired in India out of rupee/foreign currency funds
(a) Immovable property: NRIs and PIO may remit sale proceeds of immovable
property purchased by them when they were resident or out of Rupee funds
as NRI or PIO.
(b) Other financial assets: There is no lock-in period for remittance of sale
proceeds of other financial assets
Assets acquired by way of inheritance:
Sale proceeds of assets acquired through inheritance can be remitted. No lock-in
period applies here if the authorised dealer is satisfied that the proceeds are from
inherited property.
Remittance of assets out of NRO account by a person resident outside India other than NRI/PIO A foreign national who is not a citizen of Pakistan, Bangladesh, Nepal or Bhutan and who
has retired as an employee in India,
has inherited assets from a resident Indian, or
is a widow residing outside India and has inherited assets of her deceased
husband who was a resident Indian can remit upto USD one million per calendar
year on production of documentary evidence to support the acquisition by way
of inheritance or legacy of assets to the authorised dealer.
Restrictions
The above facility of repatriation from sale of immovable property is not extended
to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and
Bhutan. Remittance of sale proceeds from other financial assets is not extended to
citizens of Pakistan, Bangladesh, Nepal and Bhutan.
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Foreign Nationals of non-Indian origin on a visit to India
Foreign nationals of non-Indian origin are permitted to open a NRO account
(current/savings) on their visit to India with funds remitted from outside India
through normal banking channels or by foreign exchange brought to India. The
balance in the NRO account is converted by the bank into foreign currency for
payment to the account holder when he leaves India, provided the account was
maintained for less than six months. The account should not be credited with any
local funds during the term, except for interest accrued on it.
Grant of Loans/ Overdrafts by Authorised Dealers/ Bank to Account Holders
and Third parties
Loans to NRI account holders and to third parties is granted in Indian Rupees by
authorized dealers (banks) against the security of fixed deposits provided:
The loans are utilized only for meeting the borrower's personal requirements or
for business and not for agricultural/plantation /real estate or relending activities
RBI regulations pertaining to margin and rate of interest will apply
All norms and considerations which apply to loans to trade and industry will
apply to loans and facilities granted to third parties.
The authorized dealer/bank may allow an overdraft to the account holder subject to
his commercial discretion and compliance with the interest rate directives.
Change of Resident Status of Account holder -
(a) From Resident to Non-resident
When a resident Indian leaves India for taking up employment or for carrying on
business outside India, his existing account is designated as a Non-Resident
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(Ordinary) Account, except in the case of persons shifting to Bhutan and Nepal.
For the latter, the resident accounts do not change to NRO accounts.
(b) From Non-Resident to Resident
NRO accounts may be re-designated as resident rupee accounts once the account
holder returns to India for taking up employment, or for carrying on business or for
any other purpose indicating his objective to stay in India for an uncertain period.
Where the account holder is only on a temporary visit to India, the account
continues to be treated as non-resident during the visit.
Treatment of Loans/ Overdrafts in the Event of Change in the Resident Status
of the Borrower
In case of a resident Indian who had availed of loan or overdraft facilities while
resident in India and who subsequently becomes a NRI, the authorised dealer may
at its discretion allow the loan facility to continue. In this case, payment of interest
and repayment of loan may be made by inward remittance or out of bonafide
resources in India.
Payment of funds to Non-resident/Resident Nominee
The amount payable to a non-resident nominee from the NRO account of a
deceased account holder is credited to the NRO account of the nominee.
Facilities to a person going abroad for studies
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Students going abroad for studies are treated as Non-Resident Indians (NRIs) and
are eligible for all the facilities enjoyed by NRIs. All loans availed of by them as
residents in India will continue to be extended as per FEMA regulations.
International Credit Cards
Authorized dealers are allowed to issue International Credit Cards to NRIs and
PIO, without the permission of the RBI. Such transactions can be made by inward
remittance or out of balances held in the cardholder's FCNR/NRE/NRO Accounts.
Income Tax
The remittances, after payment of tax are allowed to be made by the authorized
dealers on production of a statement by the remitter and a Certificate from a
Chartered Accountant in the formats prescribed by the Central Board of Direct
Taxes, Ministry of Finance, Government of India
TAX BENEFITS for NRIs
Interest on NRE & FCNR deposits are free of income tax.
Tax @ 30% will be deducted at source on all interest income in NRO accounts.
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On permanent return to India, income on all investments out of foreign
exchange funds would be eligible for a flat tax rate of 20% (excluding
surcharge) till maturity of the investments.
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CHAPTER 4
SERVICES OFFERED BY
VARIOUS BANK TO
NRI’S
NRI BANKING
BANKING SERVICES
NRI banking services including deposits, savings accounts, finance like home
loans, personal loans etc. Various banks like ICICI Bank, Citibank, HDFC Bank
and many other nationalized and private banks that hold authorized dealer's
licenses from the Reserve Bank of India (RBI) provide remittances, savings,
earnings, investments and repatriation services.
Besides the major commercial banks, certain cooperative and regional rural banks
(RRB's) have also been specifically permitted to maintain NRI accounts. This
would increase NRI remittances in Bihar, Kerala, U.P. and Gujarat where a large
chunk of the rural population have settled abroad.
The banks also offer finance services to the NRI's that cover home loans for buying
new residential property, housing renovation loans for constructing or modifying
on the existing properties, personal loans and other loan products.
Another FDI (Foreign Direct Investment) magnet has been the various money
transfer services provided. Various banks provide quick, convenient and
economical fund remit to India. These include:
Online remittance services
Remittance of funds to partner exchange houses in India
Telegraphic or wire transfer
Fund transfer through cheques/ DD's and Travelers' cheques.
Many banks also offer Demat account services to the NRI's that enable NRI's
online stock investment and share trading services. Special NRI credit cards
acceptable globally are available with various banks. These specialized services
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and banking accounts have drawn enormous NRI funds to India.
SERVICE OFFERED BY ICICI BANK:-
Rupee plus plan :- At ICICI Bank, we believe in providing you with the most
competitive returns on your hard earned money. Now you can earn even higher
returns on your deposits by investing in Rupee plus plan.
What does the Rupee plus plan offer you :- NRE-FD interest rates rate being
regulated by RBI, is nearly same across banks. In Rupee plus plan we have devised
a way to make your money work harder and smarter and earn higher returns in
terms of NRI as compared to a NRE FD.
Currencies :- you can being funds in any convertible currency, which will be
converted to USD (if not in USD already).
Minimum Deposit :- USD 25,000 or equivalent.
Tenor: - for 1 year only.
How does the Rupee plus plan work? Instead of putting the money in NRE FD
directly, the money is put in USD denominated FCNR. This FCNR earns interest
as per prevailing FCNR interest rates.
Additionally, at the time of booking the FCNR a Forward Agreement is also drawn
to exchange the maturity amount of USD to Rupees at a given rate (Forward Rate).
Rupee plus plan advantage :- on a average the returns are significantly higher
compared to putting your money in NRE FD as per the prevailing market rates.
Returns in rupee terms are assured once the deal is booked irrespective of the
future movements in currency markets.
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The following banking facilities are available to NRIs, as per the current