Types of NRI Account

Opening a bank account with any banking service that has been verified by the Reserve Bank of India (RBI) is a service available to any Indian citizen. However, for those who have maintained their Indian citizenship but reside out of the country; Non-Residential Indians (NRI), this process is not so streamlined, and there exist separate procedures and types of accounts that NRIs can open. These accounts vary for a number of reasons, including the fact that as an NRI you reside abroad and subsequently earn and transact in foreign denominations based on where you currently reside, your banking and investments needs vary. NRIs can avail some banking services, for instance, they are allowed to open a demat account

This article will break down the types of NRI accounts alongside some more information that might help you assess whether you are eligible for an NRI account and how you can apply for one.

What is an NRI account?

An NRI account refers to a banking account opened in any Indian or Indian affiliate bank by citizens who do not currently reside in India. There exist three main types of NRI accounts:

1. NRE account: Non - Resident external

2. NRO account: Non - Resident ordinary

3. FCNR account: Foreign currency Non - Resident

Eligibility

NRI accounts are only available for citizens who have lived outside of India’s geographical border for 120 days or more. Additionally, they have to have spent less than four years of the last 10 years living outside India. NRIs are allowed to open a free demat account. Generally, they open two demat accounts: an NRE demat account and an NRO demat account. These demat accounts combined service income that is repatriable and non-repatriable.

Read More here: Difference Between NRE and NRO Account

Types of NRI accounts

1. NRE Account

An NRE, or Non-Resident External account, is an account that NRIs are eligible for. The purpose of this account is to allow Nonresidential Indians to deposit any income that originates from their country of residence, but can be stored in Indian rupees, in an NRE account. This form of account offers a number of options, such as the ability to open the account as savings, current account, or for fixed and/or recurring deposits.

An additional benefit to this type of account, is that there is no tax that is imposed on any interest amount earned from the money stored in these accounts. They allow for repatriation of funds and can be opened with a relative who is an Indian citizen and resident.

2. NRO Account

An NRO account, abbreviated from a Non-Resident Ordinary account is another form of account that NRIs are eligible for. Similar to an NRE account, an NRO account allows the account holder to store any amount in the Indian currency. However, it varies from an NRE account as it only allows for income generated from within India to be stored. Meaning, any amount earned from their country of residence will not qualify for this account. Instead, you would have to open an NRE account to store this money. However, recent developments, based on the bank and a couple other factors, have allowed for income earned from a foreign state to also be stored in this account in some cases. Similar to NRE accounts, NRO accounts can also be opened in the form of a savings, current or fixed deposit account.

One use for an NRO account is for when individuals migrate to another country to seek residence and employment, it is recommended that they convert their residential account into an NRO account.

3. FCNR account

FCNR stands for a ‘Foreign Currency Non-Resident’ account. This type of account varies from the previous two, as it allows Nonresidential Indians or persons of Indian origin (POI) to deposit any earning they make abroad and additionally, store them in the currency of origin i.e., the currency of their country of residence. An added benefit of this type of account for NRIs is the fact that any amount deposited is tax exempt and can be stored in that state so long as the account holder maintains their NRI status.

Conclusion

Nonresidential Indians, despite not being residents of India, still hold an investment in their country of origin, a sentiment they might want to replicate in a financial sense, or still have family living within the country, due to which they might want to hold any given sum of money in an Indian bank account. With a growing demand for these facilities for NRIs, the banking industry has generated a number of account types that suit the requirements and needs of NRIs, allowing them to maintain a financial stronghold in their country of origin while residing outside its bounds. In addition to these banking services, NRIs also qualify for various other financial benefits such as being able to open a free demat account.

Open Demat Account at IIFL