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NRE

Non Resident Indian (NRI):

  • who has gone out of India or who stays outside India for the purpose of employment, or
  • who has gone out of India or who stays outside India for carrying on business or vocation outside India, or
  • who has gone out of India or who stays outside India for any other purpose indicating his intention to stay outside India for an uncertain period.

PIO stands for Person of Indian Origin:

  • A citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) is a PIO if
  • he/ she at any time held an Indian passport; OR
  • he/ she or either of his/ her parents or either any of his/ her grandparents was a citizen of India; OR
  • he/ she is a spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen above.

Features of NRE Accounts available to Non-Resident Indians (NRIs):

Particulars Non-Resident (External) Rupee Account Scheme
[NRE Account]
(1) (3)
Who can open an account NRIs
(individuals of Bangladesh / Pakistan nationality/ownership require prior approval of RBI)
Joint account In the names of two or more non-resident individuals provided all the account holders are persons of Indian nationality or origin;
Resident close relative (relative as defined in Section 6 of the Companies Act, 1956)* on ‘former or survivor’ basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.
Nomination Permitted
Currency in which account is denominated Indian Rupees
Repatriablity Repatriable
Type of Account Savings, Current, Recurring, Fixed Deposit
Period for fixed deposits From one to five years,
Rate of Interest With effect from March 1, 2014, interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits.
Operations by Power of Attorney in favour of a resident by the non-resident account holder Operations in the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.
LOANS
 		 All loan proposals/enquiries from NRIs must be refered to Head Office
a. In India  
i) to the Account holder Permitted without any ceiling subject to usual margin requirements
ii) to Third Parties Permitted without any ceiling subject to usual margin requirements.
b. Abroad  
i) to the Account 
holder 		 Permitted without any ceiling subject to usual margin requirement
ii) to Third Parties Permitted without any ceiling subject to usual margin requirements.
c. Foreign Currency Loans in India  
i) to the Account holder Permitted without any ceiling subject to usual margin requirements.
ii) to Third
Parties		 Permitted without any ceiling subject to usual margin requirements
Purpose of Loan  
a. In India  
i) to the Account holder i) Personal purposes or for carrying on business activities.*
ii) Direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms / companies.
iii) Acquisition of flat / house in India for his own residential use. (Please refer to para 6(a) of Schedule1 to FEMA 5).
ii) to Third Parties Fund based and / or non-fund based facilities for personal purposes or for carrying on business activities *. (Please refer to para 6(b) of Sch. 1 to FEMA 5)
b. Abroad
To the account holder and Third Parties		 Fund based and / or non-fund based facilities for bonafide purposes.

The loans cannot be utilised for the purpose of on-lending or for carrying on agriculture or plantation activities or for investment in real estate business.

  • Balances held in the NRE account are freely repatriable.
  • Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.

Permitted Credits and Debits

Permissible credits to NRE account are inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers' cheques, issued against encashment of foreign currency, where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-I / Category-II, transfers from other NRE / FCNR accounts, sale proceeds of FDI investments, interest accruing on the funds held in such accounts, interest on Government securities/dividends on units of mutual funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of refunds, etc.

  • Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligible to open such accounts, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc.

*Close relative (relative as defined in Section 6 of the Companies Act, 1956)

Extract of Section 6 of the Companies Act, 1956

Meaning of “relative”

A person shall be deemed to be a relative of another if, and only if,-

  1. they are members of a Hindu undivided family; or
  2. they are husband and wife; or
  3. the one is related to the other in the manner indicated in Schedule IA.

Schedule IA

List of Relative

  1. Father
  2. Mother (including step-mother)
  3. Son (including step-son)
  4. Son’s wife
  5. Daughter (including step-daughter)
  6. Father’s father
  7. Father’s mother
  8. Mother’s mother
  9. Mother’s father
  10. Son’s son
  11. Son’s son’s wife
  12. Son’s daughter
  13. Son’s daughter’s husband
  14. Daughter’s husband
  15. Daughter’s son
  16. Daughter’s son’s wife
  17. Daughter’s daughter
  18. Daughter’s daughter’s husband
  19. Brother (including step-brother)
  20. Brother’s wife
  21. Sister (including step sister)
  22. Sister’s husband
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