NON RESIDENT INDIANS ( NRI ) - FAQs - FACILITIES FOR NRIs

Facilities for Non-Resident Indians ( NRIs )
&

FREQUENTLY ASKED QUESTIONS (FAQ) BY NRIs

These are FAQs for NRI as provided by RBI. The answers for these are also given at the end of the questions. We have arranged these in such a manner where you can use them easily.

Chapter I : General (Q.1 to Q.5)

Q.1 Who is a non-resident Indian (NRI)?
Q.2 Who is a person of Indian Origin?
Q.3 What is an OCB?
Q.4 Are OCBs required to produce any certificate regarding ownership/beneficial interest in them by NRIs?
Q.5 What are the various facilities available to NRIs/OCBs?

CHAPTER 2 : BANK ACCOUNTS (Q.6 to Q.49)

2A. General:
Q.6 Can accounts be maintained by NRIs with any bank in India?
Q.7 Are NRIs permitted to maintain accounts in rupees and in foreign currency?

2B. Rupee Accounts
Q.8 What are the different types of rupee accounts permitted to be maintained?
Q.9 Can NRIs maintain current/savings/fixed deposit rupee accounts with authorised dealers/authorised banks in India?
Q.10 Can proceeds of foreign currency notes/travellers cheques be credited to NRE accounts without any restriction?
Q.11 Can NRE accounts be opened by the power of attorney holder in India on behalf of a non-resident?
Q.12 Can resident Power of Attorney holder operate on the NRE accounts?
Q.13 Can Power of Attorney holder credit proceeds of foreign currency notes/bank notes and travellers cheques to the NRE accounts?
Q.14 What is the distinction among NRE account NRSR account and NRO account?
Q.15 Can NRO/NRE/NRSR accounts be maintained by NRIs jointly with residents?
Q..16 What is the rate of interest payable on such accounts?
Q.17 Are debits and credits to NRO accounts allowed freely by banks maintaining the accounts?
Q.18 What are the admissible debits and credits to NRE accounts?
Q.19 Can funds in NRE/NRO/NRSR accounts be repatriated outside India?
Q.20 Can funds in NRE/NRO/NRSR accounts be utilised for payment of air fare to/from and other travel related expenses in India of the account holder and/or his dependents?
Q.21 Are temporary overdrawings permitted in NRO Savings Bank accounts?
Q.22 Are NRO/NRE/NRNR account holders eligible for loans/overdrafts against their fixed deposits?
Q.23 What are the rates of interest charged on such loans?
Q.24 Can loans raised against NRE fixed deposits be repaid out of funds in NRO/NRSR accounts?
Q.25 Can a third party in India take loans against the NRO fixed deposit accounts of NRI?
Q.26 Is nomination allowed in NRO/NRE/NRSR accounts?
Q.27 Is repatriation of funds belonging to non-resident nominees permitted?
Q.28 Is transfer of funds between NRE accounts maintained by two different account holders permitted?
Q.29 At what rates are remittances to India by NRIs for credit to NRE/NRO/NRNR/NRSR accounts converted into rupees?
Q.30 Is there any scheme under which non-residents other than NRIs can also keep rupee deposits with banks in India?
Q.31 How should an account under the Non-Resident Non-repatriable (NRNR) Rupee Deposit Scheme be opened?
Q.32 Can the principal or the interest accrued on NRNR deposits be repatriated outside India at any time?
Q.33 Can the principal together with the interest accrued on NRNR deposits be renewed, on maturity?
Q.34 Can loans/overdrafts be availed of against the security of NRNR deposits?
Q.35 What is the status of NRO/NRSR/NRE accounts on the return of the account holder to India?
Q.36 Does the account holder suffer any loss of interest on such redesignation of accounts?

2C. Foreign Currency Accounts
Q.37 Can accounts be maintained by NRIs/OCBs in foreign currencies?
Q.38 What are the foreign currencies in which such accounts can be maintained?
Q.39 Are FCNR accounts permitted to be maintained in the form of current/savings accounts?
Q.40 Is premature withdrawal of the FCNR term deposit allowed?
Q.41 What is the penalty for premature withdrawal of a FCNR deposit?
Q.42 If a FCNR deposit of 6 months maturity is withdrawn prematurely, would any interest be payable?
Q.43 Are the interest rates on FCNR deposits liable for periodical revision?
Q.44 What about debits to FCNR accounts for local payments?
Q.45 Are funds in FCNR accounts freely repatriable abroad?
Q.46 Can FCNR deposits be held jointly with residents?
Q.47 Is nomination allowed in FCNR accounts?
Q.48 Is repatriation of FCNR funds to non-resident nominees permitted?
Q.49 What is the status of FCNR accounts on the return of the account holder to India?

CHAPTER 3. Investments in Securities/Shares and Company Deposits (Q.50 to Q. 102)

3A. Government Securities/Units
Q.50 Can NRIs invest their funds in Government securities or Units of Unit Trust of India (UTI)?
Q.51 Can NRIs make investments in National Savings Certificates issued by Post Offices in India?
Q.52 Can Government securities/units be freely transferred or sold?
Q.53 Are sale/maturity proceeds of Government securities/Units/National Savings Certificates allowed to be repatriated abroad?

3B. Company Shares/Debentures
3B.1 Direct Investment without Repatriation benefits
Q.54 Is permission of Reserve Bank required for NRIs to invest in proprietary/partnership concerns on non-repatriation basis?
Q.55 Is permission of Reserve Bank required for making investments in new issues of Indian companies on non-repatriation basis?
Q.56 Are any formalities required to be completed by NRIs for getting the benefit of the above general permission?
Q.57 Can NRI/OCBs make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institutions on non-repatriation basis?
Q.58 Can NRIs make investments in non-convertible debentures of Indian companies?
Q.59 Can NRIs purchase existing shares/debentures of Indian companies by private arrangement?
Q.60 Is it necessary for a resident, holding securities in Indian companies, to secure any approval from Reserve Bank on his becoming a non-resident for holding such securities?
Q.61 Is income/interest earned on investments/deposits held in India by NRIs on non-repatriation basis allowed to be repatriated?
Q.62 What is the procedure to be followed for seeking repatriation in such cases?

3B.2 Direct Investment with Repatriation benefits
Q.63 What are the schemes available to NRIs for direct investments in India with repatriation benefits?
Q.64 What is 24% Scheme?
Q.65 What is 51% Scheme?
Q.66 Is remittance of interest/dividend to NRI investors freely allowed under the 24%/51% Scheme?
Q.67 What are the specified industries under the 100% Scheme?
Q.68 Is dividend/interest earned in respect of investments made under the 100% Scheme freely remittable to the NRIs abroad?
Q.69 How does an NRI obtain permission of Reserve Bank for investment under the 24% or 51% or 100% Scheme?
Q.70 Besides the 24%, 51% and 100% Schemes is there any other scheme for investment by NRIs in the equity of Indian companies?
Q.71 Is the capital brought into India for revival of a sick industrial unit allowed to be repatriated?
Q.72 How can an NRI obtain permission of Reserve Bank for investment in a sick industrial unit?
Q.73 Under the existing Industrial Policy, investment by foreign collaborators upto 50%/51%/74% of the equity is allowed by Reserve Bank on repatriation basis in certain high priority industries. Can NRIs take up the balance 50%/49%/26% equity in such cases on repatriation basis?
Q.74 Can NRIs make investments in companies engaged in real estate development in India?
Q.75 What is the procedure for obtaining Reserve Bank permission in this regard?
Q.76 Will repatriation of the original investment and/or dividend income be freely permitted?
Q.77 Are investments in Air Taxi operations permitted to be made by NRIs/OCBs?
Q..78 Can NRIs invest in non-convertible debentures on repatriation basis?
Q.79 What is the procedure to be followed for making investment in the schemes of domestic Mutual Funds with repatriation benefits?
Q.80 Can NRIs invest in 100% Export Oriented Units on repatriation basis?
Q.81 Can NRIs acquire shares disinvested by Government of India in Public Sector Enterprises (PSEs) by inviting sealed tenders?
Q.82 What is the procedure for issue of rights entitlement to NRIs?
Q.83 What is the procedure required to be followed by NRIs for renunciation of rights entitlement?
Q.84 What is the procedure for issue of bonus shares?
Q.85 Can NRIs obtain loans abroad against the collateral of shares/debentures of Indian companies?
Q.86 Can sale proceeds of the shares/debentures be remitted abroad for liquidation of outstandings against such loans/overdrafts?

3B.3 Portfolio Investment Scheme
Q.87 What is the Portfolio Investment Scheme?
Q.88 What is the procedure for making applications?
Q.89 What is a designated branch?
Q.90 Whether NRI/OCB can apply through more than one designated branch?
Q.91 Is it necessary to maintain a bank account with the designated branch through whom the application is made?
Q.92 Is there any ceiling on the investment under the Portfolio Investment Scheme?

3C. Company Deposits
Q.93 Can NRIs keep deposits with companies in India with repatriation benefits?
Q.94 Do NRIs need permission of Reserve Bank for placing funds in fixed deposits with firms/companies on non-repatriation basis?
Q.95 Are NRIs permitted to invest in Commercial Paper (CP) issued by Indian companies?

3D. Sale/Transfer of Shares/Securities
Q.96 Is permission of Reserve Bank required for sale/transfer of Government securities/units?
Q.97 Is permission of Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs?
Q.98 Can NRIs transfer/sell their shares/debentures/bonds held on non-repatriation basis to residents freely?
Q.99 What is the procedure for sale/transfer of shares/debentures/bonds held by NRIs with repatriation benefits?
Q.100 What is the procedure to be followed by NRIs for sale/transfer of shares/debentures to residents by private arrangements?
Q.101 Can shares/debentures be given away as gifts to relatives?
Q.102 Can rupee securities, shares, bonds, debentures be transferred by way of gift to registered charitable trusts/organisations?

CHAPTER 4. Investment in Immovable Property (Q.103 to Q.119)

Q.103 Do non-resident Indian citizens require permission of Reserve Bank to acquire residential/commercial property in India?
Q.104 Do foreign citizens of Indian origin require permission of Reserve Bank to purchase immovable property in India for their residential use?
Q.105 In what manner the purchase consideration for the residential immovable property should be paid by foreign citizens of Indian origin under the general permission?
Q.106 What are the formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?
Q.107 Can such property be sold without the permission of Reserve Bank?
Q.108 Can sale proceeds of such property if and when sold be remitted out of India?
Q.109 Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?
Q.110 What is the procedure for seeking such repatriation?
Q.111 Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift?
Q.112 Can immovable property held in India, be transferred by way of gift to relatives/registered charitable trusts/organisations in India?
Q.113 Can foreign citizens of Indian origin acquire commercial properties in India?
Q.114 Can they dispose of such properties?
Q.115 Can sale proceeds of such property be remitted out of India?
Q.116 Can the properties (residential/commercial) be given on rent if not required for immediate use?
Q.117 Can NRIs obtain loans for acquisition of a house/flat for residential purpose from authorised dealers/financial institutions providing housing finance?
Q.118 Can Indian companies grant loans to their NRI staff?
Q.119 Can authorised dealer grant housing loan to non-residents of Indian nationality where he is a principal borrower with his resident close relative as a co-obligant/guarantor or where the land is owned jointly by such NRI borrower with his resident close relative?

CHAPTER 5.Facilities to Returning Indians (Q. 120 to Q.143)

A. Overseas Assets
Q.120 Are Returning Indians permitted to retain their assets abroad even after return to India?
Q.121 Are they required to obtain any permission from Reserve Bank for holding these assets?
Q.122 Do they enjoy any freedom in regard to utilisation of these overseas assets?
Q.123 Can they bring back the funds to India and hold them with separate account?

B. Resident Foreign Currency (RFC) Accounts Scheme
Q.124 What is the Resident Foreign Currency (RFC) Account Scheme?
Q.125 Is any permission from Reserve Bank required for opening such accounts with authorised dealers?
Q.126 In which currencies can RFC accounts be maintained?
Q.127 What funds can be credited to RFC accounts of Returning Indians?
Q.128 Can income received from their overseas assets in the form of dividends etc., or sale proceeds of such assets be credited to RFC accounts?
Q.129 Can pension received by the account holder from abroad be credited to his RFC account?
Q.130 NRIs returning to India for permanent settlement were granted RIFEE facility. Is this facility still available?
Q.131 Can funds in RFC accounts be remitted abroad?
Q.132 Can funds in RFC accounts be utilised for local payments?
Q.133 Can a Returning Indian desiring to go abroad again for employment, business or vocation transfer his funds in RFC account to NRE/FCNR account?
Q.134 Can persons who have returned to India after a short assignment of less than one year open RFC accounts?

C. Import of gold/silver by NRIs
Q.135 Can NRIs bring gold into India?
Q.136 In what form can the gold be brought into India?
Q.137 Are NRIs required to pay customs duty on the gold brought by them into India?
Q.138 How often can a NRI bring gold into India?
Q.139 Is it necessary that the NRI should have stayed abroad at least for a minimum period of six months prior to his return to India for being eligible to bring gold?
Q.140 Can NRIs bring silver into India?
Q.141 What is the rate of duty payable on such import?
Q.142 Can they bring both gold and silver?
Q.143 Can NRIs sell gold/silver imported by them to residents?

CHAPTER 6. Miscellaneous (Q. 144 to Q. 156)

Q.144 Are any tax concessions available to NRIs on balances/deposits held in NRE/FCNR accounts?
Q.145 Are similar concessions available in respect of balances held in NRO accounts?
Q.146 What are the tax benefits to the NRNR deposit account holders?
Q.147 What is the approved method of sending remittances into India?
Q.148 At what rates are remittances in foreign currencies made by NRIs converted by banks into rupees?
Q.149 Can remittances be sent into India otherwise than through the medium of a bank in the country of residence of the remitter?
Q.150 Can Exchange Houses draw drafts in foreign currencies?
Q.151 Can NRIs take out of India precious stones or jewellery purchased by them during their visit to India?
Q.152 Can assets held in India by NRIs prior to their becoming non-resident be repatriated outside India?
Q.153 Can NRIs take out of India household articles such as carpets, curios, etc., purchased out of funds in NRO accounts during their temporary visit to India?
Q.154 Can NRIs settle their hotel bills in India in Indian rupees?
Q.155 Whether the pension payable in India to NRI can be remitted?
Q.156 Can NRIs obtain rupee credit cards in India?

Chapter I
General

Q.1	Who is a non-resident Indian (NRI)?

Ans.	An Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Persons posted in U.N. organisations and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-residents). Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens (NRIs) for the purpose of certain facilities.

Q.2	Who is a person of Indian Origin?

Ans.	A.	For the purposes of availing of the facilities of opening and maintenance of bank accounts and investments in shares/securities in India

	A foreign citizen (other than a citizen of Pakistan or Bangladesh) is deemed to be of Indian origin, if,

	(i)	he, at any time, held an Indian passport, or
	(ii)	he or either of his parents or any of his grand parents was citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1955).

	Note: A spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or of a person of Indian origin is also treated as a person of Indian origin for the above purposes provided the bank accounts are opened or investments in shares/securities in India are made by such persons only jointly with their NRI spouses.

	B.	For investments in immovable properties

	A foreign citizen (other than a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka, or Nepal), is deemed to be of Indian origin if,

	(i)	he held an Indian passport at any time, or
	(ii)	he or his father or paternal grand-father was a citizen of India by virtue of the (Constitution of India or the Citizenship Act, 1955 (57 of 1955).

Q. 3	What is an OCB?

Ans.	Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian nationality or origin resident outside India and include overseas companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly, to the extent of atleast 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which atleast 60% of the beneficial interest is irrevocably held by such persons. Such ownership interest should be actually held by them and not in the capacity as nominees. The various facilities granted to NRIs are also available with certain exceptions to OCBs so long as the ownership/beneficial interest held in them by NRIs continues to be atleast 60%.

Q.4	Are OCBs required to produce any certificate regarding ownership/beneficial interest in them by NRIs?

Ans.	Yes. In order to establish that the ownership/beneficial interest in any OCB held by NRIs is not less than 60%, the concerned body/trust is required to initially furnish a certificate from an overseas auditor/chartered accountant/certified public accountant in form OAC where the ownership/beneficial interest is directly held by NRIs, and in form OAC 1 where it is held indirectly by NRIs and further that such ownership interest is actually held by them and not in the capacity as nominees. Thereafter a simple certificate signed by the Managing Director or Chief Executive Officers of the OCB on the lines indicated above may be submitted.

Note: In the case of closely held OCBs (i.e. where shareholders belong to the same family or are closely related to each other, certificate in form OAC/OAC1 may be submitted in the first instance alongwith documentary evidence to the effect that the shareholders belong to the same family or are closely related to each other. Annual submission of OAC/OAC1 thereafter is not necessary and it will suffice if a certificate signed by the Managing Director/Chief Executive Officer of the OCB is submitted stating that there is no change in the shareholding pattern since submission of the last certificate.

Q.5	What are the various facilities available to NRIs/OCBs?

Ans.	NRIs/OCBs are granted the following facilities :

	1.	Maintenance of bank accounts in India.
	2.	Investments in securities/shares of, and deposits with, Indian firms/companies.
	3.	Investments in immovable properties in India.

Details of these facilities are given in the respective chapters.

Q. 6

Can accounts be maintained by NRIs with any bank in India?

Ans.

Banks holding authorised dealers' licences (i.e. banks authorised to deal in foreign exchange) or banks specifically authorised in this behalf by Reserve Bank can only maintain accounts in the names of NRIs. Certain co-operative/commercial banks (referred to as authorised banks) have been specifically permitted to maintain accounts of NRIs expressed in rupees even though they are not authorised dealers.

Q.7	Are NRIs permitted to maintain accounts in rupees and in foreign currency?
Ans.	Yes. Accounts can be maintained by NRIs in rupees as well as in foreign currency. Accounts in foreign currencies can, however, be maintained with authorised dealers only.

B.	Rupee Accounts

Q.8	What are the different types of rupee accounts permitted to be maintained?
Ans.	Four types of rupee accounts viz. Non-resident (External) Rupee Accounts (NRE), Non-Resident (Special) Rupee (NRSR) Account, Ordinary Non-resident Rupee Accounts (NRO) and Non-resident (Non-repatriable) Rupee deposit accounts (NRNR) are permitted to be maintained by NRIs.

Q.9	Can NRIs maintain current/savings/fixed deposit rupee accounts with authorised dealers/authorised banks in India?
Ans.	NRO, NRE and NRSR accounts can be maintained in current/savings/fixed deposits form while NRNR account can be only in fixed term deposits.

Q.10

Can proceeds of foreign currency notes/travellers cheques be credited to NRE accounts without any restriction?

Ans.

Authorised dealers have been permitted to credit the proceeds of foreign currency notes/travellers cheques brought by the account holder from abroad during his visit to India provided they are tendered in person. Where the amount of foreign currency notes tendered exceeds U.S.$ 5000/- or its equivalent or the total amount of currency notes and travellers cheques tendered for credit to NRE accounts exceeds U.S.$ 10,000 or its equivalent, it should have been declared to the Customs on the Currency Declaration Form (CDF) at the time of the account holder's arrival into India. Further, in the case of travellers cheques, they should be presented by the account holder himself and discharged by him in the presence of the official of the concerned bank.

Q.11	Can NRE accounts be opened by the power of attorney holder in India on behalf of a non-resident?
Ans.	No.

Q.12	Can resident Power of Attorney holder operate on the NRE accounts?
Ans.	Yes, but only for local payments to be made on behalf of the account holder. In cases where the account holder or a bank designated by him has been granted permission by Reserve Bank to make investments in India, the Power of Attorney holder (POA) is permitted to operate the account to facilitate such investments. POA holders cannot, however, make gifts from NRE accounts.

Q.13	Can Power of Attorney holder credit proceeds of foreign currency notes/bank notes and travellers cheques to the NRE accounts?
Ans.	No.

Q.14

What is the distinction among NRE account NRSR account and NRO account?

Ans.

Balances held in NRE accounts can be repatriated abroad freely, whereas funds in NRSR and NRO account cannot be remitted abroad but have to be used only for local payments in rupees. Consequently, funds remitted from abroad or local funds which can otherwise be remitted abroad to the account holder can only be credited to NRE accounts. Funds due to the non-resident accountholder which do not qualify, under the Exchange Control regulations, for remittance outside India are required to be credited to NRO accounts. The accountholders can freely transfer funds from NRO/NRE/FCNR accounts to NRSR account but transfer of funds from NRSR account to other accounts of NRI is not permissible irrespective of the source of funds.

Q.15	Can NRO/NRE/NRSR accounts be maintained by NRIs jointly with residents?
Ans.	NRO & NRSR accounts can be held jointly with residents. However, NRE accounts cannot be held jointly with residents.

Q.16	What is the rate of interest payable on such accounts?
Ans.	Banks in India have been given freedom to decide interest rates on all non-resident rupee accounts. However, the rates of interest on deposits are subject to change as per the directives issued by Reserve Bank (Department of Banking Operations and Development) from time to time.

Q.17

Are debits and credits to NRO accounts allowed freely by banks maintaining the accounts?

Ans.

Yes. Debits for local payments are allowed freely. Funds representing legitimate dues of the account holder or proceeds of remittances received from abroad through banking channels are permitted to be credited freely. Debits to the accounts for the purpose of investment in India and credits representing sale proceeds of investments are allowed subject to the accountholder giving an undertaking at the time of opening the account to the effect that such investments/disinvestments would be covered either by the general or special permission of Reserve Bank.

Q.18	What are the admissible debits and credits to NRE accounts?
Ans.	Debits for local payments/investments are allowed freely. Credits to an account, of funds emanating from a local source would be permissible only if the funds are of a repatriable nature i.e. funds which are eligible to be remitted abroad.

Q.19	Can funds in NRE/NRO/NRSR accounts be repatriated outside India?
Ans.	Funds held in NRE accounts can be repatriated abroad freely. Funds held in NRO accounts which would generally be from local source cannot be repatriated outside India. Funds held in NRSR account also cannot be repatriated. (Please also see Answers to Questions 61 and 62).

Q.20	Can funds in NRE/NRO/NRSR accounts be utilised for payment of air fare to/from and other travel related expenses in India of the account holder and/or his dependents?
Ans.	Yes. Banks maintaining such accounts have been authorised to permit such payments. Airlines/shipping companies and their agents have also been permitted to accept payments in rupees.

Q.21	Are temporary overdrawings permitted in NRO Savings Bank accounts?
Ans.	Yes. Authorised dealers may allow such overdrawings up to Rs. 20,000/- subject to the condition that the overdrawings together with the interest payable thereon are cleared within a period of two weeks.

Q.22	Are NRO/NRE/NRNR account holders eligible for loans/overdrafts against their fixed deposits?
Ans.	Yes, except for the purpose of relending, carrying on agricultural/plantation activities or for investment in real estate business. Loans against NRE fixed deposits can, however, be utilised for investments in India on non-repatriation basis, in certain specified areas and for acquisition of flats/houses subject to prescribed conditions.

Q.23	What are the rates of interest charged on such loans?
Ans.	The rate of interest on such loans will be as per the directive issued by Reserve Bank (Department Banking Operations and Development) from time to time.

Q.24	Can loans raised against NRE fixed deposits be repaid out of funds in NRO/NRSR accounts?
Ans.	The loans raised against NRE deposits can be repaid out of funds held in NRO/NRSR accounts but in such cases, the interest would be charged at commercial rate in force from time to time.

Q.25.	Can a third party in India take loans against the NRO fixed deposit accounts of NRI?
Ans.	Yes. Subject to certain conditions.

Q.26	Is nomination allowed in NRO/NRE/NRSR accounts?
Ans.	Yes.

Q.27	Is repatriation of funds belonging to non-resident nominees permitted?
Ans.	Funds held in NRO/NRSR accounts will be allowed to be credited to the non-resident nominee's NRO/NRSR account only and no repatriation is permitted. Remittance of funds to the non-resident nominee from the deceased person's NRE account will be permitted by authorised dealers.

Q.28

Is transfer of funds between NRE accounts maintained by two different account holders permitted?

Ans.

Yes. Authorised dealers can permit transfer of funds from the NRE account of one person to the NRE account of another person. Authorised dealers can transfer funds held with them in NRE account to the account of same person held with another authorised dealer. Funds held in NRE account can also be transferred to other authorised dealer for the purpose of opening NRE account in the name of the same person provided a certificate confirming the NRE status of the account from which funds are transferred is produced. Transfer of funds by way of gift can be permitted by authorised dealer after obtaining an undertaking from the transferee/transferee's bank that gift tax rules/regulations have been complied with.

Q.29	At what rates are remittances to India by NRIs for credit to NRE/NRO/NRNR/NRSR accounts converted into rupees?
Ans.	Remittances for credit to rupee accounts (i.e. NRE/NRO/NRNR/NRSR accounts) maintained by NRIs are converted at the market rate.

Q.30	Is there any scheme under which non-residents other than NRIs can also keep rupee deposits with banks in India?
Ans.	Yes, NRIs and other non-residents can maintain NRO rupee accounts as well as keep deposits with banks in India under NRNR Rupee Deposit Scheme.

Q.31

How should an account under the Non-Resident Non-repatriable (NRNR) Rupee Deposit Scheme be opened?

Ans.

Such an account can be opened with an authorised dealer in India by remitting funds from abroad in any convertible foreign currency. Under the NRNR Scheme, deposits designated in rupees can be kept for periods ranging from 6 months to 3 years. NRIs can also open such accounts by transferring funds from their existing NRE/FCNR accounts. No penal interest is chargeable for premature withdrawal of NRE/FCNR deposits for the purpose of making investment in the scheme if the deposit is to be kept with the same authorised dealer.

Q.32	Can the principal or the interest accrued on NRNR deposits be repatriated outside India at any time?
Ans.	The principal amount of the deposit is not eligible for repatriation. Interest earned up to 30th September 1994 is also not eligible for repatriation. Interest earned for the period beginning 1st October 1994 is, however, eligible for repatriation or can be utilised for opening fresh NRE/FCNR deposits, or can be credited to existing NRE accounts.

Q.33	Can the principal together with the interest accrued on NRNR deposits be renewed, on maturity?
Ans.	Only the principal amount of deposit could be renewed under the scheme upto 30th September 1994. However, since interest accrued for the period from 1st October 1994 is repatriable, the principal amount together with interest accrued for the period from 1st October 1994 can be renewed under the scheme.

Q.34	Can loans/overdrafts be availed of against the security of NRNR deposits?
Ans Yes.	Authorised dealers are permitted to grant loans/overdrafts for purposes other than investment.

Q.35	What is the status of NRO/NRSR/NRE accounts on the return of the account holder to India?
Ans.	Banks have been advised to redesignate such accounts as resident accounts on return of the account holder to India.

Q.36	Does the account holder suffer any loss of interest on such redesignation of accounts?
Ans.	No Banks have been advised to continue to pay interest at the contracted rate till the maturity of the deposit if the deposit is held for the full term even after conversion into resident rupee account.

C.	Foreign Currency Accounts

Q.37	Can accounts be maintained by NRIs/OCBs in foreign currencies?
Ans.	Yes. Accounts in foreign currencies (FCNR accounts) can be maintained by NRIs/OCBs with authorised dealers in India.

Q.38	What are the foreign currencies in which such accounts can be maintained?
Ans.	FCNR Accounts can be maintained in Pound Sterling, U.S. Dollar, Deutsche Mark (upto December 2001), Euro and Japanese Yen.

Q.39	Are FCNR accounts permitted to be maintained in the form of current/savings accounts?
Ans.	No. FCNR accounts can be maintained only in the form of 'term deposits', i.e. a deposit kept for fixed periods ranging from 6 months to 3 years.

Q.40	Is premature withdrawal of the FCNR term deposit allowed?
Ans.	Yes. However, this is subject to the levy of a penalty.

Q.41	What is the penalty for premature withdrawal of a FCNR deposit?
Ans.	Interest in such cases is paid at one per cent below the interest rate payable for the period for which the deposit has actually run. Interest on deposits is, however, payable only if they are kept for a minimum period of six months. Incidentally, these matters are governed by the instructions/directives issued by Reserve Bank (Department of Banking Operations and Development) from time to time.

Q.42	If a FCNR deposit of 6 months maturity is withdrawn prematurely, would any interest be payable?
Ans.	No. While the premature withdrawal would be allowed, no interest would be payable. For such premature withdrawals the bank may levy penalty as per their discretion.

Q.43

Are the interest rates on FCNR deposits liable for periodical revision?

Ans.

Yes. The Banks have been permitted to offer interest on such deposits at rates not in excess of LIBOR minus 25 basis points in respect of the deposits of 6 months and above but less than one year and LIBOR + 50 basis points in respect of deposits of maturity of one year and above. (LIBOR rate prevailing on the last working day of the previous week for the relevant maturity and currency.) Subject to this guideline, banks can offer either fixed or floating rate of interest on such deposits. [The rates of interest are subject to change in accordance with the directives issued by Reserve Bank (Department of Banking Operations and Development) from time to time.]

Q.44	What about debits to FCNR accounts for local payments?
Ans.	Debits for local payments in rupees are allowed freely. As regards debits for investments in India, please see Chapters III and IV.

Q.45	Are funds in FCNR accounts freely repatriable abroad?
Ans.	Yes. Authorised dealers maintaining these accounts would allow repatriation abroad of these funds.

Q.46	Can FCNR deposits be held jointly with residents?
Ans.	No.

Q.47	Is nomination allowed in FCNR accounts?
Ans.	Yes.

Q.48	Is repatriation of FCNR funds to non-resident nominees permitted?
Ans.	Yes. (Also see answer to Q.27 for repatriation of funds in NRE account)

Q.49	What is the status of FCNR accounts on the return of the account holder to India?
Ans.	Banks would treat the deposits held in FCNR accounts as resident deposits but would continue to pay interest at the contracted rate till maturity of the deposit.

Q.50		Can NRIs invest their funds in Government securities or Units of Unit Trust of India (UTI)?
Ans.		Yes. NRIs are freely permitted to invest their funds in Government securities or Units of UTI through authorised dealers. Units can also be purchased directly from UTI.

Q.51		Can NRIs make investments in National Savings Certificates issued by Post Offices in India?
Ans.		Yes. Investments in National Savings Certificates can be made by NRIs subject to the terms and conditions applicable to the sale/issue of such certificates. However, NRIs are not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Patra.

Q.52		Can Government securities/units be freely transferred or sold?
Ans.		Yes, provided the transfers/sales are arranged through an authorised dealer. Units can, however, be repurchased directly by UTI.

Q.53		Are sale/maturity proceeds of Government securities/Units/National Savings Certificates allowed to be repatriated abroad?
Ans.		If such securities were purchased out of funds remitted from abroad or out of NRE/FCNR accounts, sale/maturity proceeds can be repatriated. Sale/maturity proceeds of securities purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be remitted abroad. Interest earned during the financial year 1994-95 and onwards can, however, be remitted to the extent permitted by Reserve Bank (See Answers to Questions 61 and 62).


B.		Company Shares/Debentures

		NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchange/s in India. These facilities are granted both on repatriation and non-repatriation basis.

B.1		Direct Investment without Repatriation benefits

Q.54		Is permission of Reserve Bank required for NRIs to invest in proprietary/partnership concerns on non-repatriation basis?
Ans		No. Reserve Bank has granted general permission to non-resident individuals of Indian nationality/origin to invest by way of capital contribution in any proprietary or partnership concern in India on non-repatriation basis provided the investee concern is not engaged in agricultural/plantation activity or real estate business. This facility is, however, not available to OCBs.

Q.55		Is permission of Reserve Bank required for making investments in new issues of Indian companies on non-repatriation basis?
Ans.		No. Indian companies have been granted general permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights issue provided the investee company is not engaged in agricultural/plantation activity or real estate business (excluding real estate development i.e. development of property and construction of house) or chit fund or is not a Nidhi company.

Q.56		Are any formalities required to be completed by NRIs for getting the benefit of the above general permission?
Ans.		No. However, the firms/companies concerned are required to file declarations with Reserve Bank in form DIN giving particulars of the investments made, within ninety days from the date of the investment.

Q.57		Can NRI/OCBs make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institutions on non-repatriation basis?
Ans.		Yes.

Q.58		Can NRIs make investments in non-convertible debentures of Indian companies?
Ans.		Yes. Applications for necessary permission should be made to Reserve Bank (Central Office) by the concerned Indian company in form ISD.

Q.59		Can NRIs purchase existing shares/debentures of Indian companies by private arrangement?
Ans.		Yes. Reserve Bank permits NRIs, on application in form FNC 7, to purchase shares/debentures of existing Indian companies on non-repatriation basis. An undertaking about non-repatriation is to be given in form NRU.

Q.60		Is it necessary for a resident, holding securities in Indian companies, to secure any approval from Reserve Bank on his becoming a non-resident for holding such securities?
Ans.		No. Reserve Bank has granted general permission to companies in India to enter the overseas addresses of the shareholders in their books in such cases provided the companies obtain undertakings from the holders that they will not seek repatriation of any sale proceeds of the security.

Q.61		Is income/interest earned on investments/deposits held in India by NRIs on non-repatriation basis allowed to be repatriated?
Ans.		Yes. Income/interest accruing during the financial year 1994-95 and onwards on bank deposits and investments held by NRIs with non-repatriation benefits will be eligible for repatriation as under:

		(a)	Up to U.S. $ 1,000 or its equivalent in full and one-third of the balance income earned during the financial year 1994-95;

		(b)	Up to U.S. $ 1,000 or its equivalent in full and two-third of the balance income earned during the financial year 1995-96;

		(c)	The entire income earned during the financial year 1996-97 and onwards.

			Note: The investment/principal amount of deposits made/held on non-repatriation basis (will, however, not be allowed to be repatriated abroad. Further funds held in NRSR accounts and/or interest/income accrued on funds held in these accounts will not be be allowed to be repatriated abroad.

Q.62		What is the procedure to be followed for seeking repatriation in such cases?
Ans.		NRIs should designate a branch of an authorised dealer through whom the remittance of income is to be made and make an application in form RCI to the designated branch giving details of incomes earned during the previous financial year alongwith a Chartered Accountant's Certificate. The designated branch will allow the remittance of net amount (i.e. after payment of tax) or credit it to NRE/FCNR account of the applicant.


B.2		Direct Investment with Repatriation benefits

Q.63		What are the schemes available to NRIs for direct investments in India with repatriation benefits?
Ans.		NRIs can make investments in new issues of shares/convertible debentures of Indian companies under direct investment schemes such as 24% scheme/51% scheme/100% scheme. They can also invest in the schemes of domestic Mutual Funds floated by public/private sector institutions/companies. Non-resident investors are not required to apply for permission to invest. The company concerned will have to file a declaration in Form ISD together with the required documents to Reserve Bank within 30 days from the date of issue.

Q.64		What is 24% Scheme?
Ans.		Under the 24% Scheme, Indian companies engaged or proposing to engage in any activity including finance, hire purchase, leasing, trading or other services, establishment of schools/colleges, etc. (except agricultural/plantation activities) are allowed to issue shares/debentures to NRIs with repatriation benefits to the extent of 24% of the new issue.

Q.65		What is 51% Scheme?
Ans.		Under the 51% Scheme, NRIs/OCBs are permitted to subscribe to new issues of equity/preference shares and convertible debentures of any new or existing company on repatriation basis provided

		a)	The issue of equity/preference shares and convertible debentures to NRIs/OCBs with repatriation benefits does not exceed 51 per cent of the face value of each new issue of the company.

		b)	The shares of the company are not listed on any stock exchange, and

		c)	The company is engaged in manufacturing activity not being an activity specified in Annexure III to the Statement of Industrial Policy 19991 of Government of India amended from time to time.

		Investment under this scheme can be made for setting up new manufacturing projects or for expansion/diversification of their existing manufacturing activities.

Q.66		Is remittance of interest/dividend to NRI investors freely allowed under the 24%/51% Scheme?
Ans.		Yes. There is no ceiling or restriction on the amount of remittable dividend. Remittance of interest/dividend to NRI investors will be allowed by authorised dealers under the powers delegated to them.

Q.67		What are the specified industries under the 100% Scheme?
Ans.		Under 100% Scheme, NRIs are permitted to invest in high priority industries listed in Annexure III to the Statement on Industrial Policy dated 24th July 1991 of the Government of India up to 100% of the new issue.

Q.68		Is dividend/interest earned in respect of investments made under the 100% Scheme freely remittable to the NRIs abroad?
Ans.		Dividend/interest can be remitted freely except in the case of consumer goods industries where the outflow on account of dividend is required to be balanced by export earnings of the company either in the year of declaration of dividend or in the years prior to the declaration of dividend. This requirement is enforced for a period of seven years from the commencement of commercial production.

Q.69		How does an NRI obtain permission of Reserve Bank for investment under the 24% or 51% or 100% Scheme?
Ans.		The NRI investor need not apply to Reserve Bank. Indian companies have been permitted to issue shares/convertible debentures to NRIs/OCBs. They have to file declaration in Form ISD together with the required documents to Reserve Bank within 30 days from the date of issue.

Q.70		Besides the 24%, 51% and 100% Schemes is there any other scheme for investment by NRIs in the equity of Indian companies?
Ans.		Yes. NRIs are permitted to undertake revival of sick industrial units by making bulk investment in them to the extent of 100 per cent either by way of purchase of existing equity shares or in the form of subscription to new equity issues.

Q.71		Is the capital brought into India for revival of a sick industrial unit allowed to be repatriated?
Ans.		Yes.

Q.72		How can an NRI obtain permission of Reserve Bank for investment in a sick industrial unit?
Ans.		Application for necessary permission should be made by the Indian company to the Central Office of Reserve Bank in Mumbai in form RSU.