NRE AND NRO

1. The Banks NRI Deposit Accounts scheme is open to non-resident Indians only. The term 'Non-Resident Indian' refers to Indian nationals and foreign passport holders of Indian origin. They include spouses of Indian citizens and any individual whose parents or grandparents was / were resident in undivided India.

2. All deposits, whether savings, current or time deposits are placed with the Bank under the Reserve Bank of India (RBI) regulations, and are governed by and subject to laws in effect from time to time and payable only at the branch where such deposits are made.

3. Deposits will be accepted under the RBI's FCNR (B) scheme in US dollars, Pound Sterling, Japanese Yen, EURO, Canadian Dollars and Australian Dollars. All other deposits may be tendered in any other acceptable currency but are maintained in Indian Rupees.

4. The Bank reserves the right to reject any deposit application without assigning any reason whatsoever.

5. Deposits established with the proceeds of cheques will be value-dated after clearance.

6. The Bank shall not be obliged to accept or repay the deposit(s) in cash.

7. The foreign currency equivalent of the principal and interest on repatriable Rupee deposits and accounts can increase or decrease depending upon foreign exchange fluctuations.

8. Non-Resident accounts (NRE/NRO and FCNR) opened with the Bank to be operated and maintained for the purpose of conducting bonafide transactions in Rupees and permissible currencies (as may be designated by Reserve Bank from time to time) in accordance with the provisions of the Foreign Exchange Management Act, 1999 (Act) and the rules and regulations made thereunder. The opening, operation and maintenance of such account shall not in any manner contravene or violate the provisions of the Act and the rules and regulations made thereunder.

9. The account holder is requested to declare the purpose /source of funds of transaction undertaken on NRE /NRO /FCNR account to allow the Bank to validate the same in line with the prevalent regulatory/FEMA guidelines as applicable from time to time.

Types of Accounts

NRE account: To be funded with remittance from overseas or transferred from other NRE / FCNR accounts. Local credits are not permitted. Both principal and interest are fully repatriable. They can be held as Savings, Current or Fixed Deposits Accounts.

NRO account: This account can be funded by remittance from overseas or through local sources. Interest accrued on Fixed Deposits is repatriable after tax deduction at source. Principal is not repatriable. This account can be held as a Savings, Current or Fixed Deposit Account

Difference between NRE and NRO Accounts

Following points will give you a clear understanding of NRE and NRO and will also bring out how these two accounts differ from each other.

Motive or Purpose – NRE accounts help you with foreign exchange that has been earned by you while you are outside India. While NRO accounts come handy when you have some regular flow of income coming to you in form of rents, pensions, dividends etc even after becoming an NRI.

Flow of Funds – When we talk of remittance, the Indian funds earned by you that are not required to be sent abroad form a part of the credits of an NRO account whereas funds that you consider for remittance outside the Indian boarders need to be credited to NRE account

Transfer – When you talk of an NRE account you are allowed to transfer funds from NRE account to NRO account however transfer of funds from an NRO account to an NRE account is not permitted.

Deposits and Withdrawals – When we talk of NRO accounts, you can put funds in this account in Indian currency as well as in foreign currency but when you seek withdrawals they can be made only in India currency. In NRE account repatriation is allowed outside India in any currency but deposits are to be made specifically in foreign denominations whereas withdrawals can only be done in Indian currency.

Repatriations – RBI does not play a significant role when it comes to repatriation of funds including the interest earned in NRE accounts. However, this does not hold true in NRO accounts as RBI has made some restrictions on repatriation in this account. You can remit only up to USD one million in one financial year including the sale proceeds of an immovable property that you do as an NRI. But you can freely remit you current income that includes rents, dividends, pensions etc after TDS.

Taxation Laws – NRE accounts do not qualify for any kind of wealth tax. Interest earned from these accounts is also exempt from taxes. NRO accounts falls under the taxation slab- 30 percent along with 3 percent education cess is deducted as TDS. This charge is applicable to fixed deposits as well as savings account.

Effect of Exchange Rate Fluctuations – NRE accounts fall under the pursuit of exchange rate fluctuations. These accounts are exposed to two kinds of exchange loss namely day-to-day fluctuations and conversion loss. NRO accounts do not involve such risk.

Joint Holders – NRE account can be opened in joint names with an NRI but not with an Indian Resident. Opening an NRO account in joint names with an Indian Resident or NRI is permissible.

Both these accounts have their own importance and features. NRE accounts are fully repatriable and also help you in making investments in India from foreign earnings. NRO accounts help you in holding earnings that you earn in form of rents, dividends, pensions etc even when you are residing outside India