As Indian economy is adopting its pace with globalisation and digitisation, different spices of accounts suited for the intended economical/personal purpose has to be devised. Hence to cater and nourish these thought processes, Foreign Exchange Management (Deposit Regulations), 2016 has brought in various provisions and guidelines with regards to allow ability to open, operate, maintain Resident and Non-Resident bank accounts in India in Foreign currency and in Indian currencies. Non-Resident can open broadly two accounts: Non-Resident Ordinary Account (NRO) and Non-Resident (External) Rupee Accounts. Provisions also take care of accounts to be opened, maintained as well as to be closed as per the said provisions and guidelines of Deposit Regulations.

Foreign Exchange Management (Deposit) Regulations, 2016 come into force from the date of their publication in the Official Gazette except sub-regulation (2) of Regulation 7. Sub-regulation (2) of Regulation 7 is deemed to have come into force with effect from 21st January, 2016.

1. Important Definition

‘Deposit’ includes deposit of money with a bank, company, proprietary concern, partnership firm, corporate body, trust or any other person;

‘FCNR (B) account’ means a Foreign Currency Non-Resident (Bank) account referred to in clause (ii) of sub-regulation (1) of Regulation 5;

‘Non-Resident Indian (NRI)’ means a person resident outside India who is a citizen of India.

NRE account’ means a Non-Resident External account referred to in clause (i) of sub-regulation (1) of Regulation 5;

‘NRO account‘ means a Non-Resident Ordinary account referred to in clause (iii) of sub-regulation (1) of Regulation 5;

‘SNRR account’ means a Special Non-Resident Rupee account referred to in sub-regulation (4) of Regulation 5;

2. Types of Accounts

1. Non-Resident (Ordinary) Account

2. Non-Resident (External) Rupee Account Scheme

3. Special Non-Resident Rupee Account (SNRR)

4. Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR)

5. Exchange Earner’s Foreign Currency (EEFC) Account

6. Resident Foreign Currency (RFC) Account Resident Foreign Currency (Domestic) [RFC(D)] Account

7. Diamond Dollar Account Scheme

8. FC Account by exporter undertaking projects or supplying on deferred payment

9. FC Account by Indian Agent o shipping or airline companies incorporated outside India

10. Account by Ship manning/ crew managing agencies in India

11. Foreign Currency account by project offices of foreign companies

12. FC Account by Indian company receiving foreign Investment under FDI

13. FC Account by organizers of International seminars, conferences or conventions

14. Foreign Currency and SNRR Account by Unincorporated JV

15. FC Account by account of diplomatic staff

16. FC Account to adjust value of goods against imports and exports with RBI approval

3. Restriction on Deposits

Save as otherwise provided in the Act or Regulations or in rules, directions and orders made or issued under the Act, no person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India:

Provided that the Reserve Bank may, on an application made to it and on being satisfied that it is necessary so to do, allow a person resident in India to accept or make deposit from or with a person resident outside India.

4. Differences Between Major Accounts

a. Non-Resident (Ordinary) Account (NRO)

b. Non-Resident (External) Rupee Account Scheme (NRE)

c. Special Non-Resident Rupee Account (SNRR)

d. Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR)

e. Exchange Earner’s Foreign Currency (EEFC) Account

f. Resident Foreign Currency (RFC) Account

NRO-Non-Resident (Ordinary) Accounts, NRE-Non-Resident (External) Rupee Account, FCNR-Foreign Currency NOn-Resident Account, RFC-Resident Foreign Currency Accounts, EEFC-Exchange Earner Foreign Currency Accounts, SNRR-Special Non-Resident Rupee Account

POINTS
NRO
NRE
FCNR
RFC
EEFC
SNRR
Intention
Going abroad with intention of being NRI
Remittance of Fund in Free Foreign Exchange
Keep the FC in the same denomination
Specially useful for NRI returning to India allowed to maintain FC for trans from overseas bank accounts
Crediting its foreign exchange income
Any Non-Resident having interest in business in India
Currency
INR
INR, deposit in FC convert in INR at Buying rate
FC (10 major FC)
FC like AUD, CAD, Euro, GBP, JPY, USD etc
FC
INR
Source of Fund
From within the country (India), FN-only credit of Interest
Travelers cheques, notes, only repatriable income is credited, INR not deposited,
Export receipts, remittance abroad, local investment
From employment or business abroad, Super-annuation or pension, sale of assets, bank a/c, int & dividend from abroad, fund from FCNR & NRE
Foreign exchange earnings excl. claim settled by ECGC / insurance co in INR, pay PC in INR or FC
Incidental to the business
Who can Open
NRI, Intention deposit from India & not to repatriate, Foreign Nationals, No Pakistan & Bangladesh National except approval of RBI
NRI, PIO/OCI, for opening account, FC need to be deposited for opening, only NRI/PIO can open not POA
BY NRI
Resident Indian without approval of RBI with condition foreign stay min 1 yrs short trip to India ignored
Indian Resident like SEZ
Any Non-Resident, Entity or person from Pakistan & Bangladesh required prior approval of RBI
Period
No Restricted, Foreign National- Max 6 Month, no other credit to account other than int
No Restriction
=1 yr but <2 Yr, >=2 yrs but <3 yrs, 3 yrs, 1-3 yr (USD, GBP, DKK, CHF, SEK) & 1-2 yr (Euro, JPY, CAD, AUD)
NA
No restriction
Max 7 years or business operations being closed, whichever is earlier
Type of Account
Current, Saving, Recurring, Fixed
Current, Saving, Recurring, Fixed
Only TD
TD, SD, Current
Current A/c
Current A/c
Min. Deposit
Rs. 5L, Rs. 1L for Term Deposit
Rs. 5L, Rs. 1L for Term Deposit
USD-1000, GBP-500, JPY-125000, Euro-750 , CAD & USD-1500, DKK-CHF-SEK-1000
USD-5000, GBP-3500, JPY-500000, EUR-5000
NA
NA
Joint Account
Resident in India-Former or Survivor Basis, NRI with NRI-PIO
Only with other NRI, with resident –former or survivor can act as POA
With two or more Non-Resident not allowed with Indian resident
With NRI or with Indian Resident (former or survivor basis)
NA
NA
Nomination
Allowed
Allowed
Not required perhaps as two or more account holder
Can be Resident or other NRI, if resident after demise transfer fund in INR or else remitted abroad
NA
Allowed-NRI, after demise fund transferred to NRO account
Rate of Interest
Saving-Normal
TD- on Bank
Current-No Interest
Saving-Ceiling at of six months USD LIBOR, TD-Ceiling rate of USD LIBOR of corres-ponding period
Fixed or Floating-celling rate of LIBOR or SWAP rates
NA
NA
No Interest
Taxation of Interest (TDS)
TDS Rate
Tax free till the time not permanently returning to India Sec 10(4) (ii), no tax on wealth as balance
Exempt U/s 10(15) (iv)(fa)
NA
No interest hence no tax
No tax
Transfer of Funds
NRO to NRE-Sub to Tax-Eligible Credit
Resident account or RFC account if permanently settled
As NRE account
Going abroad back for longer period, either remit in foreign or transfer to NRE or FCNR a/c
Credited to FCNR or NRE after change of status
NRO to SNRR not allowed
Power of Attorney
Allowed, Limited-local payment, remittances only to NRI account, investment in local if allowable, can’t transfer to other NRE, can not gift to other NRI on behalf of NRI account holder
Allowed, Limited-local payment, remittances only to NRI account, investment in local if allowable, can’t transfer to other NRE, can not gift to other NRI on behalf of NRI account holder
Allowed
Allowed same as NRE but can not open account on behalf
Not allowed
Not allowed
Foreign Currency Risk
Yes
Yes
No
No
No
Yes
Repatriabiity
Remittance of Max. 1 Million sub to bona fide purpose
No cap limit, if NRI/PIO deceased, fund transferred to NRI nominee account abroad
Fully repatriable subject to approval and AD find it bona fide.
Fully repatriated
NA
Eligible for repatriation
Loan Against
Allowed subject to Margin requirement, Usage not allowed for relending & other banned criteria
Allowed subject to condition
Same as NRE Deposits
No Loans allowed
Not allowed
Not allowed
Immediate Close
FN-temp a/c opened to collect their dues in India hence converted Resident a/c to NRO-after purchase closed
After permanently being settled in India
Like NRE deposits
If permanently going back to abroad then remit fund abroad or transfer to FCNR or NRE a/c & then close this a/c
NA
NA
Legal Backing
Schedule 3-Regulation 5(1)(iii)
See Regulation 5(1) (i)
Regulation 5(1) (ii) Schedule 2
NA
NA
NA
Status Changed
NA
Changed to Resident account or RFC account (if eligible), can credit like PF settlement to NRO account
If changed to Resident then even continue to hold deposit till maturity and after maturity transfer to either RFC or resident deposit account
Transfer the amount to FCNR or NRE account or remit abroad if he becomes back NRI
NA
After becoming resident, account will be changed to Resident deposit account
Premature withdrawal
NA
NA
Allowed, penal int charged around 1%, if withdrawn for taking higher interest benefit, penal interest not charged if renewed for more than unexpired period
NA
NA
NA

5. Other Accounts Descriptions

(A) Diamond Dollar Account Scheme

Diamond Dollar Account Scheme

(B) FC Account by exporter undertaking projects or supplying on deferred payment

supplying on deferred payment

(C) FC Account by Indian Agent or shipping or airline companies incorporated outside India

Indian Agent or shipping or airline companies

(D) FC Account by Ship manning/ crew managing agencies in India

crew managing agencies in India

(E) Foreign Currency account by project offices of foreign companies

Part I of RBI (FED) Master Direction 14/2015-16 dt 1-1-2016 and Regulation 4(G)(3) of FEM (Foreign currency accounts by a person resident in India) Regulation 2015

Apply Project Office of Foreign companies

Maintain non-interest bearing FC Account in India

Intention-for the project to be executed in India

(F) FC Account by Indian company receiving foreign Investment under FDI

foreign Investment under FDI

6. Resources Or Base Of Article

RBI Notification:

Link: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10325&Mode=0

7. Conclusion:

Having realised importance of specific circumstances and need of economy development of India, different kind of accounts have been developed but due to pace and intensity with complexity of digital transactions are concerned, it is recommended strongly all International Organisation to form specific committee who would shelter legal tenability for digital transactions which is to be routed through specific mechanism only and to develop specific account of those who do not have physical PE but who are falling themselves into either SEP (Significant Economic Presence) and EL (Equalisation Levy) with virtual presence could be tendered & monitored more strictly and direct control of RBI would be there to check tax evasion.

Source: Foreign Exchange Management (Deposit) Regulations, 2016

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