NRI Account Minimum Balance

The mere mention of the NRI minimum balance will compel you to wear the thinking cap to fathom its overall import in banking terms. The first thought is which bank offers the best minimum balance requirement juxtaposed with their services. Non-resident Indians or NRIs have distinctive banking and investment needs. According to the FEMA (Foreign Exchange Maintenance Act), you must maintain an NRI account if you desire financial transactions in India.

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Before looking for NRI minimum balance requirements, let us first explore why it comes into play.

Who is an NRI?

If you have lived abroad for more than 182 days and spent fewer than 365 days within the Indian territory in the last four years, you are an NRI. The reason for staying overseas can be for employment, business, vocation, or otherwise while remaining an Indian citizen.

In addition, if you are leaving India to work in another country, you are automatically deemed an NRI. As an NRI defined under the Income Tax Act, 1961, your financial transactions are subject to FEMA regulations.

Why Do You Need an NRI Account?

By pursuing your profession overseas, your earnings and resultant assets are in international currencies like the dollar, euro, yen, to name a few. The law mandates that you open an NRI account in Indian banks to hold and convert your securities and money into Indian Rupees.

You can open NRI accounts with your earnings abroad and in India to meet your investment goals and financial obligations regardless of your residency.

What Are the Different Types of NRI Accounts?

Having understood the different aspects of NRIs, let us look at what options you have to open accounts in Indian banks to meet your banking needs best. Accordingly, once your NRI status is confirmed, you have the option to open three types of accounts.

Though there are additional options within the broad categorization, the focus is on savings and term deposits. The three account types are – NRE (Non-Resident External), NRO (Non-Resident Ordinary), and FCNR (B) (Foreign Currency Non-Resident Bank) accounts.

Let us take a comprehensive look at each one of them.

NRE Account

It is one of the several NRI accounts where the source is your earnings abroad. Your deposited foreign currency in this account is converted to INR, and hence it is an Indian Rupee account. You can open savings or a term deposit account in this category.

The account’s salient features are:
- Tax Benefits: The amount deposited in this account is not taxable. The interest earned is also exempt from taxes. (Tax benefits are subject to changes in tax laws.)
- Repatriation Benefits: You can freely transfer the account balances to your country of residence in your preferred currency. There are no restrictions on the repatriation of funds from the account, and you are free to do so at will.
NRO Account

You can open an Indian Rupee saving or a term deposit account under this category. The primary difference between the NRO and the NRE account is the deposit that is sourced locally and not earned abroad as in the latter.

The income sources vary like dividends and rent from properties owned in India. The interest earned in this account is taxable, and you can repatriate up to USD 1 million in a given financial year.

The account’s standout features are:
- Local Finances: Your NRO account is ideally suited to manage your local earnings and expenses. In addition, you can freely meet your local financial obligations through the account.
- Joint Operation: You can open your NRO account jointly with a resident Indian for operational ease. However, the joint holder must be a close relative, and the operational instruction must be former or survivor.
FCNR (B) Account

Your choice in this account is limited to term deposit only and that too in designated foreign currencies. It fundamentally differs from the NRE and NRO accounts in the holding currency.

While they are in INR, the FCNR (B) account is an investment option in multiple foreign currencies like US Dollar, UK Pound Sterling, Japanese Yen, and Hong Kong Dollar. You retain your investment in a foreign currency of choice and repatriate the funds without restrictions.

Let us check out the salient features.
- Tax Benefits: You are not burdened with the principal invested and the interest earned with tax liability. (Tax benefits are subject to changes in tax laws.)
- Risk Mitigation: You are insulated from losses due to currency rate fluctuations since the balance is held in foreign currency.

Defined NRI Minimum Balance

After you have comprehensively understood the various banking services available to you in India, it is time to contend with the NRI minimum balance specified in accounts. It is essential to understand that no uniform formula defines the minimum balance regime.

Most banks employ the AQB (Average Quarterly Balance) or AMB (Average Monthly Balance) formula and impose penalties for default. Let us find out what most top banks have specified as the minimum balance in the NRI accounts.

Bank Name	Minimum balance in NRE/ NRO Accounts
Bank Name	AQB	AMB
IndusInd Bank	Rs.10000
Federal Bank		Rs.5000
Kotak Bank	Rs.10000
RBL		Rs.10000
ICICI Bank		Rs.10000
HDFC Bank		Rs.10000 * Rs.5000 **
SBI		Rs.3000 * Rs.2000 Rs.1000 *
DCB		Rs.10000
BOB		Rs.10000
IDFC		Rs.25000
Axis Bank		Rs.10000
The minimum balance in the FCNR (B) Account is usually UDS 1000
Legend: () Metro and Urban Branches () Semi-Urban and Rural Branches (**) Rural Branches

The banks in the above grid have been chosen at random. Most private sector banks have a uniform minimum balance pattern across branches. While others and public sector banks define minimum balance according to the geographical location and the cities where the branches are located.

In Conclusion

Living abroad is a challenge and managing finances back home may weigh heavily on the NRIs. When operating accounts in India, you must meet the minimum balance requirements to keep your account active.

You can also consult your financial advisor to know the best suitable bank account for your financial operations in India.

FAQ's

Q. What are the deposit restrictions in the NRE account that you must comply with?
A. Since NRE accounts are meant to park funds from overseas earnings, you cannot:
- Deposit INR in cash
- Gifts received within India
- Any income generated in India like dividends from investments and rent from properties owned in India
Q. What is the limit for foreign currency cash deposits in an NRE account?

A. You can deposit up to USD 5000 cash freely in the NRE account. However, you must furnish Custom Declaration Form (CDF) to remove foreign currency cash deposit limits in the NRE account for higher amounts.
Q. What are the proper credits in the NRE account?
A. The following are accepted in the NRE account as permissible deposits:
- Inward remittances from abroad.
- Interest earned on balance in the NRE account.
- Interest income from investments made through the account.
- Transfer from other NRE or FCNR (B) accounts.
- Maturity gains from investments routed through the NRE account.
Q. What is the defined tenor in the FCNR (B) account?

A. As per RBI guidelines, FCNR (B) deposits can offer a minimum tenor of 1 year and a maximum of 5 years.
Q. Can you transfer money from your NRE account for deposit in the FCNR (B) account?

A. Yes, you can transfer from the NRE account to invest in the term deposit in the FCNR (B) account. The transferred amount is converted into your chosen foreign currency at prevailing conversion rates.

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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%

¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.

**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).