Individuals who have been residing outside India for more than 120 days in a year and who have spent less than 365 days in India in the last 4 years can open these NRI bank accounts. Further, the individual must stay for a period below 4 years out of the last 10 years in India to be eligible for a Non-resident Indian (NRI) status. However, if an individual leaves India for employment in another country, such an individual is classified as NRI immediately.
What is an NRI Account?
An NRI Account refers to the accounts opened by an NRI or a Person of Indian Origin (PIO) or Overseas Citizen of India (OCI), with a bank or FI authorized by the Reserve Bank of India, to provide various banking services to NRIs. The full form of an NRI Account is a Non-Resident Indian Account opened with banks or other financial institutions.
NRIs may open NRI Accounts to deposit their income which may originate either from India or from any other country. The income source may be their employer or from an investment.
There are three types of NRI Accounts, as explained in the next section. It is essential to understand the salient features of the services offered under such NRI accounts by banks operating in India. This would help them meet their objectives, e.g., investment, remittance to resident dependents, payment of financial obligations, etc.
An individual of Pakistan or Bangladesh nationality residing in India can open only one NRI account with an authorized dealer bank if he fulfills the following conditions:
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He belongs to minority communities in these countries (viz. Christians, Hindus, Sikhs, Buddhists, Jains, and Parsis), and
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He has been permitted a long-term visa or awaits the result of an application for a long-term visa.
Types of NRI Accounts
The various types of NRI Accounts that one may opt for to meet one’s financial needs are:
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Non- Resident Ordinary (NRO) Account
An NRO or Non-Resident Ordinary Account may be opened with earnings arising from India. The source of income can range from assets or investments in the form of rent, dividends, interest, etc.
Here are some important features related to the NRO account:
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Even though deposits can be in INR or any other foreign currency, the withdrawals can only be in Indian rupees in an NRO account.
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An NRO account can be operated jointly either with an Indian Resident or an NRI.
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Interest earned on the income in an NRO account is liable for taxation.
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Earned income from pension plan, rents, etc. can be sent through an NRO account.
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The main purpose of an NRO account is to house funds from the earned income in India or abroad.
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Non-Resident External (NRE) Account
NRIs may initiate and maintain a Non-Resident External or NRE Account from their income originating in their country of employment/ residence.
Here are some key features related to NRE Account:
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The account shall be denominated in Indian Rupees.
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An NRE account can be in the form of a Current account, Savings account, Recurring Deposit account, or Fixed Deposit account.
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An NRE account can be operated jointly but only with another NRI.
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Deposits in an NRE account can be made of earnings from a foreign country only and not of earnings made in India.
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Withdrawals can be made in the currency in which the NRI resides in and therefore there is a possibility of amount fluctuation.
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Funds from one NRE account can be transferred to another NRE or NRO account easily.
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Income from the NRE account is tax-free as the principal and interest amounts are exempted from taxation.
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Investments in India can be made with the help of the NRE (Non-Resident External) account.
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Foreign Currency Non-Resident (Banks) Account
Foreign Currency Non-Resident (Banks) Account or FCNR-B comprises bank deposits made by NRIs, PIOs, and OCIs. These deposits may be denominated in any one of the foreign currencies prescribed by the Reserve Bank of India.
Here are some key points related to an FCNR (Foreign Currency Non-Resident) account:
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The currencies in which FCNR-B deposits may be held in an Account are – US Dollars (USD), Great Britain Pound Sterling (GBP), Euro (EUR), Singapore Dollar (SGD), Hong Kong Dollar (HKD), Canadian Dollar (CAD), Australian Dollar (AUD), Swiss Franc (CHF) and Japanese Yen (JPY).
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Money can be deposited in an FCNR account in any currency approved by RBI.
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FCNR accounts are considered to be term deposit accounts and not savings accounts.
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Interest rates vary from the tenure of deposit and currency deposited in the FCNR account.
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The rate of interest is fixed in an FCNR account and does not fluctuate throughout the deposit tenure.
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In case of change in residential status, an account can be held till maturity but the interest rate may fluctuate as per bank guidelines.
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An FCNR account can be operated jointly either with a close Indian resident or an NRI.
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FCNR Account tenure ranges from 1 year to 5 years.
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Income from the FCNR account is tax-free as the principal and interest amounts are exempted from taxation.
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The rate of interest does not fluctuate in an FCNR (Foreign Currency Non-Resident) account because of the deposits and withdrawals made in foreign currencies.
Difference between various NRI Accounts
The key differences amongst the three types of NRI Accounts are as follows:
| Particulars |
NRE Account |
NRO Account |
FCNR-B Account |
| Purpose of account |
Opened with income earned in the individual's country of employment/ residence and shall be denominated in Indian Rupee (INR) |
Opened with income earned from within India from assets or investments, e.g., rent, dividend, interest, etc. and shall be denominated in INR |
Opened with income earned in the individual's country of employment/ residence and shall be denominated in any of the foreign currencies stipulated by RBI |
| Types of accounts |
Savings, Current, Recurring, Fixed Deposit |
Savings, Current, Recurring, Fixed Deposit |
Term deposit accounts with a minimum tenure of 1 year |
| Currency denomination |
INR |
INR |
USD, AUD, CAD, HKD, EUR, SGD,GBP, JPY, CHF, |
| Joint holding facility |
It may be held along with another NRI |
It may be held along with an Indian resident or another NRI |
It may be held along with another NRI |
| Tenure of fixed deposits |
From 1 to 3 years. However, banks are allowed to accept NRE deposits above 3 years for Asset-Liability Management purposes |
As applicable to resident accounts |
1 to 5 years |
| Repatriation Facility |
The balance can be entirely repatriated |
Interest income can be fully repatriated. |
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| The principal amount can only be repatriated to the extent of USD 1 million in a single financial year. |
The entire balance can be repatriated |
|
|
| Exchange rate movements |
Impacted by movement in existing exchange rates |
No impact of the movement in existing exchange rates |
Impacted by movement in existing exchange rates |
| Taxability |
Interest income is exempted from tax |
Interest income is taxable |
Interest income is exempted from tax |
How to Open an NRI Account?
Opening an NRI Account is a relatively simple process with minimal hassles. The following individuals are eligible to open NRI Account:
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Step 1: Individuals on official deputation abroad by the Government of India or any Public Sector Undertaking.
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Step 2: Indian citizens residing abroad for business, studies, and employment.
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Step 3: Individuals who held an Indian passport, any time
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Step 4: Individuals whose grandparents or parents were Citizens of India as per the India Citizen Act, 1955
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Step 5: NRIs, PIOs, OCIs, and their spouses
To open an NRI account, one may visit the nearest branch of an authorized bank when in India. Alternatively, one may provide contact details to the authorized bank to assist with account opening. Some banks also provide facility to open NRI account online. In such cases, the individual may apply for the NRI account online through the bank's website by filling the account opening form online and uploading the scanned copy of the required documents. The details of some of the best banks for NRI accounts in India are provided later on this page.
Advantages and Core Benefits of Opening NRI Account
Here is a rundown of the key advantages and core benefits offered if an individual opens an NRI account:
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Enables Inward Remittances
One of the primary benefits of the NRI account is that NRIs can repatriate their income to their dependents in India. For example, Mr. Aayush is employed in San Jose, USA, but his father, a dependent individual, stays in Mumbai. He remits USD 2000 every month in his NRO Savings Account to meet his father’s daily expenses. The balance in this NRO account is denominated in Indian Rupees. Assuming an exchange rate of 1USD = Rs.75, the remittance of USD 2000 would be denominated as Rs. 1,50,000 in the NRO Account.
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Assures Continuity of Income
One of the benefits of the NRI account is that NRIs can continue to earn income from their assets in India. For example, Ms. Manasi, who is residing in London, Great Britain, has a residential flat in Bengaluru, which she has leased to Mr. Kishore. To receive rental income from the lease, Ms. Manasi may direct Mr. Kishore to deposit the monthly rent in an NRO account opened with a bank in Bengaluru.
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Enables Investment in India
NRIs can invest in Indian investment avenues such as equity, mutual funds, debt instruments, etc., through the NRI account. These investments are facilitated through the Portfolio Investment Scheme (PIS), a scheme enabled by the Reserve Bank of India, through banks and FIs, to facilitate trading and investments by NRIs in India.
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Avoidance of Exchange Rate Fluctuations
The deposits made by NRIs from their income earned in a foreign country in an FCNR-B account need not be converted into INR. This facility allows NRIs to mitigate the risk of foreign currency rate fluctuations and the resultant reduction in deposit value.
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Attractive Returns
NRIs can earn interest income at attractive rates by investing in NRI accounts such as NRE FDs or FCNR-B deposits. Interest rates in India have been higher than in many western countries for many years.
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No Tax Liability
Interest income on NRE and FCNR (B) accounts does not have any tax liability under the Income Tax Act 1961.
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Loan Facility
The authorized bank/ FI can sanction loans in India to the NRI account holder or any third party against the security of the money deposited in the NRI account. The term ‘loan’ would include all types of fund-based/non-fund-based facilities.
Some Banks that offer NRI Accounts
Before choosing a bank to open an NRI account, one of the primary factors to consider is whether it can be operated from the country of residence of the NRI. We highlight below features of products offered by five banks that are considered to be the best NRI banks in India:
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State Bank of India
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NRE/ NRO Savings Account in INR
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The monthly average balance of Rs. 10,000/-
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Interest rates at 2.70% p.a. for balances equal to or above Rs.1 lakh and 2.70% p.a. for balances below Rs.1 lakh.
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The account can be jointly opened by NRIs/ OCIs /PIOs with resident Indians on a "former or survivor" basis.
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Multi-city cheque book facility
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Debit Card for use in India
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Internet banking facility
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The facility of INR loan against NRO deposits
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Interest rates on deposits < Rs.2 Crore (depending on the tenure)
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NRE Deposits: 5.00% to 5.40% p.a.
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NRO Deposits: 2.90% to 5.40% p.a.
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HDFC Bank
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NRE/ NRO Savings Account in INR
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The monthly average balance of Rs. 10,000
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Interest rates at 3.00% p.a. for balances below Rs.50 lakhs and 3.50% p.a. for balances equal to or above Rs.50 lakh
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One can use the account to repatriate outside India.
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One can also transfer money to the NRE account under current income under the 1 million USD scheme.
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Transfer funds from the overseas account in foreign currency
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Deposit cash or traveler’s cheques in foreign currency
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Easily withdraw cash or carry out payments in India with a debit card.
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Facility to get Add-on debit card for a mandate for POA holders
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Repatriate up to USD 1 million in a financial year
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Interest rates on deposits < Rs.2 Crore (depending on the tenure)
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NRE Deposits: 2.50% to 5.60% p.a.
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NRO Deposits: 2.50% to 5.60% p.a.
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ICICI Bank
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NRE/ NRO Savings Account in INR
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The monthly average balance of Rs. 10,000 at the account level or Rs. 25,000 for multiple accounts in a single Customer ID
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Interest rates at 4% p.a. for balances equal to or above Rs.50 lakhs and 3.50% p.a. for balances below Rs.50 lakhs
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International Debit card
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24x7 phone and internet banking
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Free money transfers at competitive exchange rates
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Free cheque book and mandate card for the family resident in India
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Interest rates on deposits < Rs.2 Crore (depending on the tenure)
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NRE Deposits: 4.90% to 5.60% p.a.
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NRO Deposits: 2.50% to 5.60% p.a.
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Axis Bank
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NRE/ NRO Savings Account in INR
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Monthly average balance requirement of Rs. 25,000
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The interest rate on Savings accounts: up to 3% p.a.
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Daily Cash Withdrawal of Rs. 40,000
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Shopping Limit of Rs. 2 Lakh (NRE) and Rs. 1 Lakh (NRO)
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Visa Platinum Debit Card with Free Personal Accident cover of Rs 2 lakhs (NRE) and Rs. 1 Lakh (NRO)
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Unlimited free transactions at Axis Bank ATMs and 10 free transactions at other bank ATMs.
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Interest rates on deposits < Rs.5 Crore (depending on the tenure)
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NRE Deposits: 5.10% to 5.75% p.a.
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NRO Deposits: 2.50% to 5.75% p.a.
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Kotak Mahindra Bank
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NRE/ NRO Savings Account in INR
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Low Average Monthly Balance of Rs. 10,000/- only
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Interest on daily closing balance @ 3.5% p.a. and paid quarterly
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Competitive foreign exchange rates for transactions above USD 10,000/-
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Free repatriation of deposits, including Interest
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International Debit Card with anytime access to the bank account both in India and abroad
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At Par Cheque book facility
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24/7 phone banking access
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Internet Banking
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Sweep-in & Sweep-out facility
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NRIs or PIOs can jointly open this account with Resident Indians
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Investment advisory facility
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Easy remittances into India by wire transfer or cheque
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Interest rates on deposits < Rs.2 Crore (depending on the tenure)
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NRE Deposits: 4.35% to 4.70% p.a.
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NRO Deposits: 2.50% to 5.30% p.a.
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