Objectives:
NRI BANKING
CHAPTER 1-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.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.
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, and 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 concerned Foreigners Regional
Registration Officer (Delhi, Mumbai, Calcutta, and Chennai) would
do the same. The fee for the card, which will have a validity of 20
years, would be US$1000.
In this scheme, unless the context otherwise requires-"Person of
Indian origin" means a foreign citizen (not being a citizen of
Pakistan, Bangladesh and other countries as may be specified by the
Central Government from time to time) if,
He/she at any time held an Indian passport; or
He/she or either of his/her parents or grandparents or great
grandparents was born in and permanently resident in India as
defined in the Government of India Act, 1935 and other territories
that became part of India thereafter provided neither was at any
time a citizen of any of the aforesaid countries (as referred to in
2(b) above); or
He/she is a spouse of a citizen of India or a person of Indian
origin covered under (I) or (ii) above. Besides making their
journey back to their roots simpler, easier and smoother, this
Scheme entitles the PIOs to a wide range of economic, financial,
educational and cultural benefits. The benefits envisaged under the
Scheme include:- No requirement of visa to visit India;
No requirement to register with the Foreigners Registration
Officer if continuous stay does not exceed 180 days. If continuous
stay exceeds 180 days, then registration is required to be done
within a period of 30 days of the expiry of 180 days;
Parity with Non-Resident Indians in respect of facilities
available to the latter in economic, financial, educational fields
etc. These facilities ill include:
Acquisition, holding, transfer and disposal of immovable
properties in India except of agricultural/plantation
properties;
Admission of children in educational institutions in India under
the general category quota for NRIs- including medical/engineering
colleges, IITs, IIMs etc.
Various housing schemes of Life Insurance Corporation of India,
State Governments and other Government agencies;
All future benefits that would be extended to NRIs would also be
available to the PIO Card holders;
However, they shall not enjoy political rights in India.What is
an OCB?
Overseas Corporate Bodies (OCBs) are bodies predominantly owned
by individuals of Indian nationality or origin resident outside
India and include overseas companies, partnership firms, societies
and other corporate bodies which are owned, directly or indirectly,
to the extent of at least 60% by individuals of Indian nationality
or origin resident outside India as also overseas trusts in which
at least 60% of the beneficial interest is irrevocably held by such
persons. Such ownership interest should be actually held by them
and not in the capacity as nominees. The various facilities granted
to NRIs are also available with certain exceptions to OCBs as long
as the ownership/beneficial interest held in them by NRIs continues
to be at least 60%
What are the various facilities available to NRIs/OCBs?
NRIs/OCBs are granted the following facilities:
Maintenance of bank accounts in India.
Investment in securities/shares of, and deposits with Indian
firms/ companies.
Investments in immovable properties in India.KEY
BENEFITSNRI-Banking follows a modular structure. The various
modules render our NRI Banking solution offerings (which are stated
below) in a seamlessly integrated fashion.
The Masters module permits maximum parameterization to be done,
enabling the end user to make all changes with regard to Interest
Rates or with regard to any changes as per directives from Head
Office / RBI.Maintains Bank, Branch and holiday detailsFacilitates
maintenance of Instrument, Interest rate and overdue interest rate
details Masters. Inventory, Currency, Country, Exchange rate and
return reason details are also maintained Favors opening,
authorization and freezing of Accounts Transaction entry and
passing is made easyProvisions availed for issuing, passing and
stop payment of cheese.Supports Account closure, Preclosure,
Renewal & overdue renewal of Deposits.Aids Day Begin, Day End
& Month End ProcessingProcesses Quarterly, and transfer to
Inoperative & Half Yearly - SB Interest Calculation.Hastens
Deposit Receipt Printing, Changing to RFC, Interest Payment &
Overdue Process.Supports Acceptance and Execution of standing
instruction.Types of accountsNRI accounts are maintained by banks
which hold authorized dealers' licences from the Reserve Bank of
India. Some cooperative and commercial banks have also been
specifically permitted to maintain NRI accounts in rupees even
though they are not authorized dealers. The financial budget for
2007-08 extends NRI accounts to regional rural banks (RRBs) as
well. This would boost remittances from NRIs particularly in Bihar,
Kerala, Uttar Pradesh and Gujarat where a large number of persons
from rural areas from these states are employed overseas.
Banking Laws for NRIs allow for accounts with authorized dealers
to be maintained in Indian rupees and in foreign currency.
Various accounts:- NRE A/c - non residential (external) rupee
account.
FCNR-B A/c - foreign currency non residential account.
NRO A/c - nonresident ordinary account.
RFC A/c - resident foreign currency account.
All NRIs can open such accounts, with the exception of
individuals residing in Pakistan and Bangladesh, who require
special permission from the RBI. Joint accounts of two or more
non-residents and nomination facility are permitted.
While the FCNR (B) is a term deposit only, the NRE and NRO
accounts can be operated as either savings, current, recurring or
fixed deposit accounts. As for interest rates, FCNR (B) and NRE are
subject to a cap, and should not exceed the LIBOR/SWAP rates. In
the case of NRO accounts, rates are determined by the banks. The
interest rates, currently at 3.5% apply to a period of 1 to 3
years.
The total NRE/ FCNR deposits during 2006-2007, as per RBI
statistics, are USD 37,751 million and are expected to grow with
regional rural banks also mopping up funds. Banks are expected to
offer lucrative interest rates to bolster NRI funds.
Banks offer two types of accounts to NRIs, based on their
reparability.
Reparable Accounts
Funds that can be transferred or repatriated abroad are
maintained in a Non Resident External Bank account. Generally,
funds remitted from outside India are 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 principaland
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).
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.
Non-Reparable 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
HOW TO OPEN NRI ACCOUNTS WITH A BRANCH IN INDIATo 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 remittanceYour signature may be
verified by anyone of the following; Indian Embassy/consulate Any
person known to the Bank Notary public Any of our offices abroadYou
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 AuthorityNomination Facility available (Nominee can be a
resident Indian also)Procedures & Benefits:
Non-Resident accounts can be opened along with your remittances
through banking channel.
Photograph shall be enclosed with the opening form.
There is no ceiling on the amounts remitted for your credit in
Non-Resident account.
When the NRI depositor returns to India, the NRE account will be
automatically treated as Resident account. However NRE term deposit
will continue to earn same rate till maturity even after such
conversion.
NRE accounts earn more interest than domestic deposits.
Nomination facilities are available for registration in favor of
a non resident or resident.
Loans against deposits are allowed for purposes other than
investment up to 90% of the deposit.
The income from deposit is free from Indian Income Tax.
It is also free from Gift tax for one time gifting.Documents
Required:-In case account opened in person:
Indian passport with overseas resident address or work permit
(i.e. Green Card as residence permit for USA, H1 Visa as work
permit for USA or Hongkong ID card for residence of Hongkong)
Separate proof of Non Resident status if the passport holds
Indian address and resident Visa permit is not included in
passport. Photograph of individual account holder
For persons employed with foreign shipping company Initial work
contract
Last wage slip
For contract employees Last work contract
Letter from local agent confirming next date of joining the
foreign vessel (not more than six months from date of last return
to India)
Principal's overseas address or current work contract
In case of documents sent by mail All the relevant above
mentioned documents / signatures to be attested by any one of the
following:
Indian embassy overseas notary
Local bank Minimum balance in which one can open an account
(Differs from bank to bank):-NRO Saving Account Rs.5, 000/-
NRO - Current Account Rs.10, 000/-
NRO Term Deposit Account Rs.5, 000/-
NRE Savings Account Rs.5, 000/-
NRE Current Account Rs.10, 000/-
NRE Term Deposit Account Rs.10, 000/-
FCNR Term Deposit Account USD 500/- or its equivalent in GBP or
Euro
If you submit the money for opening/credit to an account.
Frequency of Interest payment on accounts:
NRO Term Deposit Account Half yearly
NRE Savings Account Quarterly
NRE Term Deposit Account Half yearly
FCNR Term Deposit Account QuarterlyOpening of JOINT
ACCOUNTS:-
Type of accountJoint Account with Resident IndiansJoint Account
with Non-Resident Indians
NROYesYes
NRENoYes
FCNRNoYes
Chapter 2 NRI definition- under Foreign Exchange Management Act,
1999
Definition of an NRI: Introduction:
An Indian abroad is popularly known as an NRI but the same has
two important definitions - one coined under the Foreign Exchange
Management Act, 1999 [FEMA] and the other as per the Income Tax
Act, 1961. FEMA definition:The most relevant definition concerning
an NRI's various bank accounts and investments in movable and
immovable properties in India is the one provided by Foreign
Exchange Management Act, 1999 [FEMA], which has replaced the
Foreign Exchange Regulation Act , 1973- [FERA] with effect from
June 1,2000.
Person Residing outside India is the term used for an NRI, being
a person who has gone out of India or who stays outside India for
the purpose of employment or carrying on business or vocation
outside India or any other circumstances which indicate his
intention to stay outside India for an uncertain period. Section
2(v) of FEMA, 1999 Person resident in India" means
a person residing in India for more than one hundred and
eighty-two days during the course of the preceding financial year
but does not include
a person who has gone out of India or who stays outside India,
in either case
(a) For or on taking up employment outside India, or
(b) For carrying on outside India a business or vocation outside
India, or
(c) For any other purpose, in such circumstances as would
indicate his intention to stay outside India for an uncertain
period;
a person who has come to or stays in India, in either case,
otherwise than
for or on taking up employment in India, or
for carrying on in India a business or vocation in India, or
for any other purpose, in such circumstances as would indicate
his intention to stay in India for an uncertain period;
(a) Any person or body corporate registered or incorporated in
India,
(b) An office, branch or agency in India owned or controlled by
a person resident outside India,
(c) An office, branch or agency outside India owned or
controlled by a person resident in India;
2(w) "person resident outside India" means a person who is not
resident in India; Non Resident Indian, the phrase is for the first
time defined in the regulations as a person resident outside India
who is either a citizen of India or a person of Indian Origin".
Recently RBI has clarified that students studying abroad also be
treated as NRIs under FEMA and accordingly be eligible for foreign
investments and NRE/FCNR a/cs
And the definition of a person resident outside India is simply
put as a person who is not Resident in India."
NOW, reading both the definitions together, it can be summarized
that both:
an Indian Citizen residing outside India and also
A Foreign Citizen of Indian origin residing outside India are
defined as Non-Resident Indians. Person of Indian Origin:
F.E.M.(Deposit) Regulations define a Person of Indian Origin (PIO)
as: A person, being a citizen of any country other than Pakistan
and Bangladesh, who at any time held an Indian Passport. or
a person who himself or either of his parents or any of his
grandparents were citizens of India, or
a spouse of an Indian citizen, or
A spouse of a person covered under (i) or (ii) above.
2(xii) 'Person of Indian Origin' means a citizen of any country
other than Bangladesh or Pakistan, if he at any time held Indian
passport; or
he or either of his parents or any of his grand- parents was a
citizen of India by virtue of the Constitution of India or the
Citizenship Act, 1955 (57 of 1955) or
the person is a spouse of an Indian citizen or a person referred
to in sub-clause
Person of Indian Origin (PIO) defined under Regulations re:
Immovable Property in India:
This definition is further narrowed when it comes to rules
regarding acquisition and transfer of immovable property in India.
Probably with an intention of ensuring & restricting control of
immovable properties in the hands of strictly defined persons of
Indian Origin only, this definition is further narrowed to exclude
individuals being citizens of Pakistan, Bangladesh, Sri Lanka,
Afghanistan, China, Iran, Nepal and Bhutan.
As regards immovable property transactions it may be noted that
herein the person's father or grandfather is included unlike
parents or grandparents and spouse in earlier
definition.Accordingly a Person of Indian Origin is defined herein
as:
a) Who held an Indian Passport at any time?An individual other
than citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal and Bhutan, or
b) Who himself or his father or grandfather was a citizen of
India.
[Regulation 2(c) of F.E.M. (Acquisition and Transfer of
Immovable Property in India) Regulation 2000] 2(c) 'a person of
Indian origin' means an individual (not being a citizen of Pakistan
or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal
or Bhutan), who(a) At any time, held Indian passport; OR
(b) Who or either of whose father or whose grandfather was a
citizen of India by virtue of the Constitution of India or the
Citizenship Act, 1955 (57 of 1955); Conditions of number of days
stay in India:- No doubt, Foreign Exchange Management Act, 1999
definition has also incorporated an NRI's stay of 182 days or less
during a year in India, but simply speaking if a person of Indian
origin has gone out of India for settlement he is to be treated as
an NRI irrespective of number of days he has stayed in India. Stay
in India during visits:
The Act also lays down that such a person will continue to be an
NRI during his visit/stay in India provided he has not returned to
India for taking up employment or carrying on business or vacation
or any other circumstances as would indicate his intention to stay
in India for an uncertain period. Accordingly, an NRI settled
abroad, irrespective of the number of days stay in India will
continue to be an NRI during his visit to India provided he has not
returned to India for permanent settlement.
"Overseas Corporate Body" (OCB) means a Company, Partnership
Firm, Society etc. wherein 60 % or more ownership lies with NRIs or
a Trust wherein 60 % or more financial interest is irrevocably held
by NRIs. Conclusion:At the cost of repetition, it is once again
said that an NRI permanently settled and residing outside India
will continue to be treated as an NRI under F.E.M.A.irrespective of
the number of days of his stay in India or otherwiseChapter
3-depositoryNon-Resident (External) Account - NRE Account
Eligibility -
Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs)
can open and maintain NRE accounts with authorized dealers and with
banks (including co-operative banks) authorized by the Reserve Bank
of India (RBI) to maintain such accounts. The account has to be
opened by the Non Resident account holder himself and not by the
holder of the power of attorney in India.
Opening NRE accounts in the names of individuals/entities of
Bangladesh/Pakistan nationality/ownership requires approval of
RBI
Types of Accounts - Savings, Current, Recurring or Fixed Deposit
accounts.
Debits & Credits: Payments for local expenses and
investments are allowed freely. Credits to an account, of funds
emanating from a local source would be permissible only if the
funds are of a repatriable nature.
Permitted Credits
Proceeds of remittances to India can be in any permitted
currency.
Proceeds of personal cheques drawn by the account holder on his
foreign currency account and of travelers cheques, bank drafts
payable in any permitted currency including instruments expressed
in Indian rupees for which reimbursement will be received in
foreign currency, deposited by the account holder in person during
his temporary visit to India provided the authorized dealer/bank is
satisfied that the account holder is still resident outside India,
the travelers cheques/drafts are standing/endorsed in the name of
the account holder and in the case of travelers cheques, and they
were issued outside India.
Proceeds of foreign currency/bank notes tendered by account
holder during his temporary visit to India, provided (i) the amount
was declared on a Currency Declaration Form (CDF), where
applicable, and (ii) the notes are tendered to the authorized
dealer in person by the account holder himself and the authorized
dealer is satisfied that account holder is a person resident
outside India. Permitted Debits Local disbursements
Remittances outside India
Transfer to NRE/FCNR accounts of the account holder or any other
person eligible to maintain such account.
Investment in shares/securities/commercial paper of an Indian
company or for purchase of immovable property in India within
prescribed regulations.
Any other transaction if covered under general or special
permission granted by the Reserve Bank.
Rate of Interest - as per the directives of the Reserve Bank of
India.
Loans against Security of Funds held in the Account To the
account holder
I) for personal purposes or for carrying on business activities
(except agricultural/plantation activities/investment in real
estate business). ii) For making direct investment in India on
non-repatriation basis. iii) For acquisition of flat/house in India
for his own residential use. In January 2007, the RBI imposed a
restriction on loans against deposits and securities for NRIs to a
maximum of up to Rest. 20 lakh
To third parties
the loan should be utilized for personal purposes or for
carrying on business activities (other than agricultural/plantation
activities/real estate business). The loan should not be utilized
for re-lending. Loans outside IndiaAuthorized dealers may allow
their overseas branches/correspondents to grant fund based and/or
non-fund based facilities to Non Resident depositors against the
security of funds held in the NRE accounts and also agree to
remittance of funds from India if necessary, for liquidation of
debts.
Change of Resident Status of Account Holder NRE Accounts should
be re designated as resident account or the funds held in these
accounts may be transferred to the Resident Foreign Currency (RFC)
Accounts (if the account holder is eligible for maintaining RFC
Account) at the option of the account holder immediately upon the
return of the account holder to India (except where the account
holder is on a short visit to India).
Repatriation of funds to Non Resident Nominee can be permitted
by the authorized dealer or bank in the case of an account holder
who is deceased.
Other Features - Joint Accounts - in the names of two or more
Non Resident individuals may be opened provided all the account
holders are persons of Indian nationality or origin. When one of
the joint holder become residents, the authorized dealer may either
delete his name or allow the account to continue as NRE account or
redesignate the account as resident account at the option of the
account holders. Opening of these accounts by a Non Resident
jointly with a resident is not permissible.
An Account may be opened in the name of eligible NRI during his
temporary visit to India.
Operation by Power of Attorney - Resident Power of Attorney
holder can operate on the NRE accounts but only for local payments
to be made on behalf of the account holder. The Power of Attorney
(POA) holder cannot credit proceeds of foreign currency notes/bank
notes and travellers cheques to the NRE accounts. In cases where
the account holder or a bank designated by him has been granted
permission by Reserve Bank to make investments in India, the POA
holder is permitted to operate the account to facilitate such
investments. POA holders cannot, however, make gifts from NRE
accounts.
Foreign Currency (Non-Resident Indians) FCNR (B)
AccountEligibility to Open and Maintain FCNR A/c
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
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 days rate of conversion will apply.
Funds from the FCNR account are allowed to move within the
country at no 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
holders 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 holders 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.
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.
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:
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.
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
(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 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, and 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.
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.
Chapter 4-services offered by various banksBANKING SERVICESNRI
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 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 an 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.The following banking facilities are available to
NRIs, as per the current RBI/FEMA guidelines.
ParticularsForeign Currency (Non-Resident) Account (Banks)
Scheme(FCNR(B) Account)Non-Resident (External) Rupee Account
Scheme(NRE Account)(Non-Resident Ordinary Rupee Account Scheme(NRO
Account)
Who can open an accountNRIs/PIOsNRIs/PIOsAny person resident
outside India (other than a person resident in Nepal and
Bhutan)
Joint accountIn the names of two orNRIsIn the names of two or
more NRIsMay be held jointly with residents
NominationPermittedPermittedPermitted
Currency in which accountis denominatedPound Sterling, US
Dollar, Jap. Yen or Euro. Australian Dollar, Canadian DollarIndian
RupeesIndian Rupees
RepatriabilityRepatriableRepatriableNon-repatriable*
Type of AccountTerm Deposit onlySavings, Current, Recurring,
Fixed DepositSavings, Current, Recurring, Fixed Deposit
Rate of InterestSubject to cap: LIBOR minus 25 basis points
except in case of Japanese Yen where the cap would be based on at
the prevailing LIBOR rates Rate of interest on domestic savings
account will also be applicable to NRE savings account. For Fixed
Deposits, the rates can be fixed by banks subject to ceilings
prescribed by RBIRate of interest on domestic savings account will
also be applicable to NRO savings account. For Fixed Deposits, the
rates can be fixed by banks subject to ceilings prescribed by
RBI
Tax AspectsInterest income tax free and no tax deduction at
source.Interest income tax free and no tax deduction at
source.Interest income taxable and liable for TDS @30% plus
applicable surcharge subject to conditions. DTAA benefit may be
available subject to fulfillment of conditions.
Chapter 5.RBI ISSUE GUIDELINE FOR MONEY TRANSFERMONEY
TRANSFERMoney can be transferred either through on line or drafts
or telegraphically or by wire transfer or Cheques. E-Transfer is
completely online, paperless money transfer service which enables
the customer to send money directly from one bank account in
foreign country to India. Drafts in Indian rupees can be purchased
from exchange companies of one country and mailed to the branch of
another country where the customer has the account. Telegraphic or
wire transfers can be made through branch to branch. Cheques can be
deposited for credit of the customers accounts and the Cheques will
be collected and credited to their accounts.International SWIFT
TransferThis is a secure, quick and efficient method of
transferring funds, which enables you to send money easily to any
bank which is part of the SWIFT network. There is a flat-rate
charge of Rs 500 for each SWIFT transfer made from your account.
There is no charge when you make a transfer from your Barclays NRI
account in India to a Barclays account in UK or UAE. Demand (or
Banker's) DraftThis is a means of initiating a transfer from your
account to a named payee. You can send the Demand Draft to your
intended payee, who will then be able to take the Draft into their
bank following presentation of this Draft, he/she will then receive
payment.
A Demand Draft made payable to a non-Barclays account will incur
a charge of Rs 3.5 per Rs 1,000 sent (minimum charge Rs 100).
A Demand Draft made payable to a Barclays account and a Foreign
currency DD will incur a flat-rate charge of Rs 300. UAE
EXCHANGEPROVIDING speed, convenience and security of transactions,
the Xpress Money Service of UAE Exchange company is proving to be a
modern and reliable way of sending and receiving money from
anywhere in the world, especially among the immigrant Indian in
Gulf countries. With an extensive network of branches in UAE and a
global presence in Australia, India, Kuwait, Oman, Qatar, UK, USA,
Fiji, Sri Lanka and Bangladesh, the UAE Exchange Centre specializes
in Fund Transfer across the globe and enjoys a numerous uno status
in the industry. UAE Exchange and Financial Services Ltd makes
80,000 remittances a month. The average amount of remittances per
transfer is Rest 1, 25,000. Western Union Money Transfer
Western Union is a global leader in money transfer services,
with a history of pioneering dating back more than 150 years.
Non-resident Indians can now transfer their funds to India through
the Money Transfer Service offered by Western Union. This service
is currently available for inward remittances in India. Credits to
NRE/FCNR accounts are not permitted to be routed through Money
Transfer Service Scheme (MTSS)"SENDWISE:-
A rupee demand draft delivered to the recipients doorstep within
three to four working days and can be encashed at any nationalized
bank in India.MONEYGRAM Send money online today:-
You can send money around the world online to over 84,000
moneygram agent locations, in more than 170 countries. Not only is
sending money with moneygram safe and convenient, youll find the
same day services to be one fastest way to send your money
online-usually arriving within minutes. Send money online or at a
moneygram agent location near you. Moneygram is a global leader in
international money transfers and the largest processor of money
orders in the U.S. CHAPTER 6-NRI INVESTMENTSThe Government of India
has adopted a liberal policy, with respect to investment by NRIs
and OCBs in India, such investment are allowed, both, through the
RBI route and also through the Government route, i.e., through the
Foreign Investment Promotion Board (FIPB) NRIs and OCBs are
permitted to invest up to 100% equity in real estate development
activity and civil aviation sectors. Investment, made by the NRIs
and OCBs, are fully repatriable, except in the case of real estate,
which has a 3 year lock-in period on original investment and, 16%
cap on dividend repatriation.
Various investment opportunities in India available to NRIs:- If
one is NRI, the following investment opportunities are open to
you:
Maintenance of bank accounts in India.
Investment in securities/shares and deposits of Indian
firms/companies.
Investment in mutual funds in India.Investment Policy for
Non-resident Indians (NRIs):-
Recognizing the investment potential of the Non-resident
Indians, a number of steps are being taken by the government on an
ongoing basis to attract from them in Indian companies. Some of the
investment schemes presently available to Non-resident Indians
(NRIs) include the facility to invest upto 100 percent equity with
full benefits of repatriation of capital invested and income
accruing thereon in high priority industries mentioned in the
Annexure-III to the industrial policy 1991, 100 percent export
oriented units, sick units under revival, housing and real estate
development companies, etc,. NRIs/PIOs/OCBs are also permitted to
make portfolio investments through secondary markets. In terms of
the relaxations announced in 1998-99, investment limits for an
individual NRI has been revised upwards from 1% to 5%, aggregate
portfolio investment limits by all NRIs increased from 55 to 10% of
the issued and paid-up capital of the company. The aggregate
investment limit would be separate and exclusive of FII portfolio
investment limits.
FOR NRIS INVESTMENT:- In order to help the tax-payers to plan
their Income-tax affairs well in advance and to avoid long drawn
and expensive litigation, a scheme of Advance Rulings has been
introduced under the Income-Tax Act, 1961. Authority for advance
rulings has been constituted. The tax-payer can obtain a binding
ruling from the Authority on issues which could arise in the
determination of his tax liability. A non-resident or certain
categories of resident can obtain binding rulings from the
Authority on any question of law or fact arising out of any
transaction/proposed transactions which are relevant for the
determination of this tax liability.PORTFOLIO INVESTMENT
NRIs/OCBs are permitted to make portfolio investment in
shares/debentures (convertible and non-convertible) of Indian
companies, with or without repatriation benefit provided the
purchase is made through a stock exchange and also through
designated branch of an authorized dealer. NRIs/OCBs are required
to designate only one branch authorized by Reserve Bank for this
purpose.NRIS INTEREST:- NRIs invested only 5% of their investible
assets in India with the balance being parked overseas. A major
reason for this was that the Indian banking system was not a very
preferred and trusted mode of investment for the NRI. The customer
was looking for convenience, speed, high yield on investment with
manageable risks, reasonable costs and quality services A face of
India he could associate with. Competition was not only from India
based banks, but also from local banks based overseas; conventional
and non conventional routes of money transfer.FACILITATION
AGENCIES
The main regulatory and facilitation agencies involved in the
matters related to NRIs/OCBs investment are Reserve Bank of India
(RBI), Securities and Exchange Board of India (SWBI), Authority for
Advance Rulings (AAR), Secretariat for Industrial Assistance (SIA),
Ministry of Commerce and Industry; and Office of the Chief
Commissioner (Investments & NRIs).RBI FORMS
NRIs/OCBs/PIOs do not have to seek specific permission for
approved activities covered under General permission schemes. The
activities relating to NRIs/OCBs/PIOs not covered under those
schemes either require declaration to RBI or permission from RBI.
The activities requiring Declaration/Permission along with
corresponding forms are as under;
TS 1Transfer of Shares/Debentures by Non-residents to
Residents
FNC 1Permission to establish a branch office in India by an
Overseas Company establishing a Representative Office by Overseas
Company for Liaison Activities to open a Project/Site Office in
India.
IPICompany/Individual (declaration) acquiring property
CHAPTER 7-NRI INVESTMENT IN IMMOVABLE PROPERTY IN INDIANRIs,
irrespective of their citizenship can freely acquire and transfer
residential as also commercial properties in India barring
agricultural land and plantation, with repatriation of foreign
exchange equivalent of cost of acquisition (maxi. two in case of
resi.houses) and no restrictions as regards holding period.
Rules for Acquisition & Transfer by NRIs being:
Indian citizen & Foreign citizen
Mode of Payment
Joint Holding / Restrictions
Repatriation of Sale Proceeds
Taxation of Capital Gains & Wealth-Tax
Rules for Acquisition & Transfer by Foreign Citizen NRIs
Purchase / Acquisition:
There is a general permission to acquire any immovable property
(other than agricultural land, plantation or farm-house property)
by way of purchase, provided the payment is made out of foreign
exchange inward remittance or any Non Resident bank account in
India, i.e.NR(E),FCNR(B) or NRO a/c.. Acquisition by way of
Gift:
General permission is granted to acquire any immovable property
(other than agricultural land, plantation or farmhouse property) by
way of gift from a person (donor) who is
A person resident in India, or
Adperson resident outside India (an NRI) who is Indian citizen
or foreign citizen of Indian origin. Acquisition by way of
inheritance:
General permission is granted for inheritance of immovable
property including agricultural land, plantation or farm-house
property from
A person resident in India, or
A person resident outside India who may be an Indian citizen or
foreign citizen of Indian origin provided such person had acquired
said property in accordance with the provisions of Foreign Exchange
Law in force at the time of acquisition. I.e. FERA, 1973 or FEMA
1999. Hence Agricultural land, plantation or farmhouse property can
be acquired by way of inheritance only.
Transfer / Sale:
General permission is granted for sale of any immovable property
(other than agricultural land, plantation or farmhouse property) to
a person who is resident in India.Transfer of residential or
commercial property by way of gift: General permission is granted
to gift residential or commercial property to A person resident in
India, or
A person resident outside India who may be an Indian citizen or
foreign citizen of Indian origin,
Transfer of agricultural land, plantation or farmhouse property
by sale/ gift General permission is granted to sell or gift such
property to a person who is resident in India and also an Indian
citizen. Mode of Payment:- The payment for purchase of immovable
properties is required to be made from NRI's bank account,
being:
a) Non Resident External Account (NRE);
b) Foreign Currency Non Resident (B) Account (FCNR) (B), or c)
Non Resident Ordinary Account (NRO), ord) Foreign Exchange Inward
Remittance from abroad.
It is advisable to retain records of payment made i.e. bankers
certificate
All incidental expenses such as stamp duty, registration fees
etc. should also be paid through bank only.
Repatriation of Sale proceeds An NRI being an Indian citizen or
a foreign citizen of Indian origin is allowed to repatriate the
sale proceeds of an immovable property subject to the following
conditions:
a) . The acquisition should be in accordance with the existing
Foreign Exchange Laws (i.e. FERA, 73 or FEMA 99).
b) the purchase price was met out of Foreign Exchange Inward
Remittance or NRE / FCNR (B ) account, and
c) In case of residential properties, repatriation is restricted
to a maximum of two properties.
It may be noted that the eligibility criteria of holding period
of 3 years for repatriation is removed w.e.f. 29-06-02. [Vide
notification no FEMA 65/2002 RB dated 29-06-02.]4 It may be noted
that there are no restrictions as re: repatriation of sale proceeds
vis-a-vis number of commercial or industrial properties.
The amount of repatriation is restricted to foreign exchange
equivalent of the purchase price i.e. profits / gains are not
allowed to be repatriated. CHAPTER 8. PAN CARD FOR NRIS For all
Indian citizens who are liable to pay tax under the Income Tax Act,
1961, or are required to enter into financial transactions in
India, it is mandatory to have a Permanent Account Number.
The Permanent Account Number (PAN) is a combination of 10
alphanumeric numbers issued by the Income Tax Department. The
Department has entrusted UTI Investor Services Ltd. (UTIISL) with
the task of managing IT PAN Service Centers wherever the IT
department has an office in the country. The National Securities
Depository Limited (NSDL) has also been engaged to allot PAN cards
from TIN Facilitation centers.
Applying for a PAN
Form 49A, which is the application form for a PAN, can be
downloaded from the Income Tax, UTIISL and NDSL websites:
www.incometaxindia.gov.in & www.utiisl.co.intin.nsdl.comThe
forms care also available at the IT PAN Service Centers and TIN
Facilitation Centers. A tatkal or priority service has been
provided for, to enable speedy allotment of the PAN card through
the Internet. The PAN is allotted through e-mail on priority in 5
days as against the normal 15 days to the applicant upon online
payment through a credit card. The PAN has lifetime validity.
The necessity for a PAN Card to NRIs
Apart from income returns which must carry the PAN, it is
mandatory to submit the PAN in all financial transactions, like the
purchase and sale of property in India, payments for purchase of
vehicles, foreign visits, securing a telephone connection or making
time deposits in a bank worth over Rs.50,000.
For NRIs, PAN is necessary to conduct monetary transactions in
India, invest in stocks, and pay tax on their Indian income.
The application for a PAN must be accompanied by:
A recent colored photograph of size 3.5 comes x 2.5 comes on the
application form. A proof of residence and identity (attested
school leaving/matriculation certificate/degree/credit card/voter
identity/ration/passport/driving license/telephone/electricity
bill/employer certificate. Code of the concerned Assessing Officer
of the IT Department obtainable from the IT office where form is
submitted.
A demit account facilitates buying and selling shares,
precluding cumbersome paperwork and meaningless delays. Advantages
of a Demat Account -
It is a safe, secure and convenient mode of transacting in
shares.
Minimizes brokerage charges
Ensures immediate liquidity
Removes uncertainty on ownership title of securities
Allows quick allotment of public issues
Enables smooth process in pledging shares
Avoids delays due to wrong/incorrect signatures, post, and
misplacement of certificates
Prevents risks like forgery and counterfeit, theft or damage to
documents
Saves on stamp duty, paperwork on transfer deeds
Gives immediate benefits from bonus shares and stock splits Who
offers Demat Facility?Depository Participants or DPs offer demat
account services, which would include banks. Holding a demat
account with a bank enables quick on-line dealings, ensuring credit
of a transaction to the account holders savings account by the
third day. Banks have an added advantage over other DPs with their
large network of branches.How to Open a Demat Account in India Fill
up the demat account opening form at the nearest Depository
Participant
You may refer to either
CDSLathttp://www.cdslindia.com/demat_acct/open_demat.jsp
orNSDLathttps://nsdl.co.in/for the list of DPs in India.
Joint demat accounts can be opened, retaining the same order of
names
Separate demat accounts have to be opened for different
combinations of names in the case of three or more joint
holders.
Any number of demat accounts and DPs are permitted
A multiple-sign demat is feasible, operated by several
holders
DPs charge a fee for switching shares from electronic to
physical form and vice-versa, which varies from a flat fee to a
variable fee. Remit and demat charges may also show a discrepancy
between DPs.
Some DPs offer a discount to frequent traders.
It is advisable to maintain all demat accounts with the same DP
to keep track of capital gains liabilities. Different DPs follow
dissimilar methods of computing the capital gains, which is
determined by the period of holding.
The charges on a demat account vary between DPs. Broadly, they
are: account opening fee, an annual folio maintenance charge paid
in advance, a monthly custodian fee, and a charge on transactions,
which may either be charged every month or as a flat fee per
transaction, and its nature. Some DPs may skip the account opening
fee but charge a re-opening fee for the account. Account holders
are also subject to a service tax.
No opening balance is required for a demit account. Supporting
documents to open a demat account Passport-size photograph
Proof of identity, address and date of birth
DP-client agreement on non-judicial stamp paper
PAN Card
The applicant receives an account number and a DP ID number
which are required for all future communication with the DP.
NRI Demat Accounts
NRIs need to fill in NRI in the type and repatriable or
non-repatriable in the sub-type on the form. No special permission
from the RBI is required by NRIs to open a demat account, though
specific cases may require authorization from the designated
authorised dealers.
NRIs require separate demat accounts for securities under the
foreign direct investment (FDI) scheme, which is repatriable; and
the Portfolio Investment Scheme and Scheme for Investment which can
be either repatriable or non-repatriable. Repatriable and
non-repatriable securities cannot be held in a single Demit
account.Resident Indians can continue to hold non-repatriable demat
accounts they hold even after they acquire non-resident Indian
status. However, when a NRI returns to India permanently, he must
inform his designated authorised dealer of his new status, and a
fresh account would have to be opened. The securities held in the
NRI Demat account would have to be transferred to the new resident
demat account, and the NRI Demat account closed. The Demat account
would have to be linked with the NRIs NRO account for
non-repatriable accounts and NRE accounts for repatriable accounts
to credit dividends and interest.CASE STUDY ON NRI BANKING
Increasingly at Personal we are meeting Indians living abroad
who are relocating to India. Usually such individuals have a
significant portion of their assets in the foreign country;
investments in India are usually linked to inheritance or savings
made before shifting abroad
The task we are entrusted with is to help such individuals plan
their finances. Here's how we assisted one such family.
We recently met a Person of Indian Origin (PIO) who was based in
the United States (US); he has now shifted permanently to India.
Let's call this individual Rajeev.
Almost all of Rajeevs savings are in the US; in US mutual funds
and bonds. He has no exposure to India in his asset allocation,
although he does expect to inherit some Indian assets over time.
More about Rajeev -
He is 44 years of age and was settled in US for many years
before relocating to India
He is married and has a 8-yr old daughter
Although he is not sure, there is a likelihood that his daughter
might want to go back to US for further studiesRajeev's investment
details are as follows: His combined investment in stocks and funds
in the US accounts for 50% of his net assets. Remaining 50% of his
investments are in short-term deposits, again in the US. Important
to note that he does not own any residential property, either in
the US or in India.As mentioned earlier, since the client is now
settled in India, and is certain to be here for the rest of his
life, in our view, it makes sense to shift his assets back to
India. Why do we say that? Well, if you know you are going to be in
India, and all your future incomes and expenses are going to be in
Indian Rupees, why take on the risk of being invested in US
Dollars? In case the US Dollar were to depreciate vis-a-vis the
Rupee, the value of your US assets would effectively erode. This is
not to say that no one should have money invested in other currency
assets. From our perspective, one should evaluate such investment
opportunities only when one has completed their investment plans
for domestic assets. Importantly, you should have that much money
in another currency asset that is required to meet future needs
(that need to be provided for in the other currency).
In order to reallocate his assets, Sanjeev will need to
liquidate his assets in the US and transfer the proceeds to India.
Since his daughter might go back to US for higher education in
future he will require money (US Dollars) at that point of time.
Therefore, in his case, the liquidation and then allocation of
assets must be based on his needs in India as well as in the
US.
Keeping this in mind we proposed to conduct his entire financial
planning exercise in two phases. The first phase involved
understanding of his needs in India and the US and accordingly
liquidating his investments. The second phase involved, investing
the proceeds in India. Liquidation process:
We first started with liquidation of his investments in US, and
for this, demarcating his needs in India and US became the starting
point for us. Since the client has no prior investments in India,
it gave us a good opportunity to define a well-diversified
portfolio for him.
The next step was to decide the quantum of investment to be
liquidated based on his needs. In US, he has to continue with some
of his investments for his daughter's future education. We found
that around 10% of the client's total wealth will be sufficient for
this purpose and rest he can liquidate. Thus, we advised him to
liquidate 90% of his total investments in US.
The next step was to transfer the proceeds to India. Normally,
people who have foreign currency (in this case US Dollar) get
apprehensive about the exchange rate at which their proceeds are to
be transferred. In this particular case, since the client is
already settled in India, we advised him not to pay much heed to
the exchange rate and instead start transferring the funds. Asset
allocation based on the client's needs in India:
Given that the client has no investment in property (he was
living in a rented premise), the top priority was to invest in a
property. About 40% of his assets were allocated for the purpose.
Given the hype about property, Sanjeev was keen to consider a
higher exposure; however we recommended otherwise. In our view, and
this holds true for most individuals, the number of properties you
own should be linked to your 'real' needs i.e. property which you
need to give as inheritance or property for self-use.The fact that
the client is financially very sound and in a position to take some
risk, we recommended that he invest upto 35% of the surplus in
well-managed diversified equity funds in a disciplined manner based
on his needs and objectives. The portfolio consisted of no more
than six schemes.
Equities as an asset class are best equipped to generate high
returns over longer time frames (3-5 years). Thus, his investment
in equities should be well equipped to cater his future needs such
as his daughter's marriage, his retirement planning or any other
need as and when required.
Another 10% of the surplus cash inflows could be invested in
debt funds (short-term debt funds, as at present interest rates are
on the rise). Inclusion of debt funds in the portfolio will ensure
that the portfolio becomes well diversified across asset
classes.
The balance (5%) could be maintained in liquid assets for any
immediate requirement or for contingency. Rajeev was also advised
to take up a term insurance policy for himself. This is a pure risk
cover plan that enables the individual to opt for a high insurance
cover at relatively lower premiums.
First and foremost, it needs to be executed (investing in mutual
funds, buying property) and then the plan needs to be monitored
regularly. This is necessary as over time, Rajeev's risk profile
will change, as he gets older, he may not be comfortable with a
higher allocation to equity, so a portion of his money will have to
be shifted to lower risk assets. Also the performance of the mutual
fund schemes will have to be monitored. Given the nature of the
task, it is best for Rajeev that he engages the services of a
professional and competent financial planner CHAPTER
9-CONCLUSION
NRI Banking today stands as one of the most profitable business
for banks. With India having one of the largest NRI populations and
a very prosperous one too, NRI banking is one hot business no bank
can afford to ignore today. India needs foreign exchange reserves
for its developing economy. Realizing this, banks are shaping up
their strategies in order to attract this NRI money. Further with
India pushing for Capital Account Convertibility, and the success
of Pravasi Bharatiya Diwas, prospects for NRI banking has never
been so good than today.
Deposits can be broken before the maturity period but the
interest payable would be the applicable interest rate prevailing
for that period at the time of opening the deposit. The minimum
period for NRE and FCNR would be 1 year. A penalty charge as
applicable will be levied.
Yes. The mandate facility is available for NRI customers. The
mandate form duly completed (with Form 60 or PAN card, proof of
identity, proof of address, and photo) may be handed over to the
branch when the account is opened to authorize a person in India to
operate the account. This is possible only in the case of savings
accounts.
Yes. However, you may consider doing so only on maturity of the
deposit so that there is no loss of interest.
Deposits are value dated. The date will be the date on which the
funds are received by Barclays (India) in its Nostrum accounts.
A NRI can remit up to USD 1 million (or equivalent) per calendar
year for any bonfire purpose subject to payment of tax and
furnishing the required documents.
The International ATM-cum-Debit card offers Rest 50,000 of cash
withdrawal per day and transactions worth Rest 50,000 at merchant
establishments.
There are no withdrawal charges for cash withdrawn from any VISA
ATM network across the world. For purchases and ATM transaction(s)
outside India there is a 2.5% currency conversion charge, at all
VISA enabled POS and ATM machines. Service Tax (currently 12.36%)
on these charges will be levied. For details of charges on Domestic
debit cards, kindly refer the schedule of charges for Consumer
banking.39