Non-Resident (External) Account - NRE Account

Eligibility -

Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can open andmaintain NRE accounts with authorized dealers and with banks (including co-operative banks) authorized by the Reserve Bank of India (RBI) to maintain suchaccounts.The account has to be opened by the Non Resident account holder himself and not bythe holder of the power of attorney in India.

Opening NRE accounts in the names of individuals/entities of Bangladesh/Pakistannationality/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 anaccount, of funds emanating from a local source would be permissible only if thefunds 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 travellers cheques, bank drafts payable in anypermitted currency including instruments expressed in Indian rupees for whichreimbursement will be received in foreign currency, deposited by the accountholder in person during his temporary visit to India, provided the authoriseddealer/bank is satisfied that the account holder is still resident outside India,the travellers' cheques/drafts are standing/endorsed in the name of theaccount holder and in the case of travellers' cheques, they were issued outsideIndia.

Proceeds of foreign currency/bank notes tendered by account holder during histemporary visit to India, provided

(i) the amount was declared on a Currency Declaration Form (CDF), whereapplicable, and(ii) the notes are tendered to the authorised dealer in person by the accountholder himself and the authorised dealer is satisfied that account holder is aperson 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 (exceptagricultural/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 securitiesfor NRIs to a maximum of upto Rs. 20 lakh

To third parties: The loan should be utilised for personal purposes or for carrying onbusiness activities (other than agricultural/plantation activities/real estate business).The loan should not be utilized for re-lending.

Loans outside India: Authorised dealers may allow their overseasbranches/correspondents to grant fund based and/or non-fund based facilities to NonResident depositors against the security of funds held in the NRE accounts and alsoagree 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 theseaccounts may be transferred to the Resident Foreign Currency (RFC) Accounts (if theaccount holder is eligible for maintaining RFC Account) at the option of the accountholder immediately upon the return of the account holder to India (except where theaccount holder is on a short visit to India).

Repatriation of funds to Non Resident Nominee can be permitted by the authorizeddealer or bank in the case of an account holder who is deceased.

Other Features -

Joint Accounts – Joint Accounts in the names of two or more Non Resident individualsmay be opened provided all the account holders are persons of Indian nationality ororigin.

When one of the joint holder become residents, the authorised dealer may eitherdelete his name or allow the account to continue as NRE account or redesignate theaccount as resident account at the option of the account holders. Opening of theseaccounts by a Non Resident jointly with a resident is not permissible.

An Account may be opened in the name of eligible NRI during his temporaryvisit to India.

Operation by Power of Attorney - Resident Power of Attorney holder canoperate on the NRE accounts but only for local payments to be made on behalfof the account holder. The Power of Attorney (POA) holder cannot creditproceeds of foreign currency notes/bank notes and travellers cheques to theNRE accounts.

In cases where the account holder or a bank designated by him has been grantedpermission by Reserve Bank to make investments in India, the POA holder is permittedto operate the account to facilitate such investments. POA holders cannot, however,make gifts from NRE accounts.

Special Series of Cheques -

Temporary Overdrawing - permitted from NRE Savings Bank account up to Rs.50,000 for a period not exceeding two weeks.

Remittances abroad by Resident nominee - application for meeting theliabilities if any of the deceased account holder or similar other purposes,should be forwarded to RBI for consideration.

Tax Exemption - Interest income exempted from income tax, balances held arealso exempt from wealth tax.

Reporting - Transactions to be reported to the Reserve Bank of India.

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