NRI Account in Indian Banks – NRE, NRO, FCNR Account

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With the Interest Rates in India being significantly higher side as compared to other developed Countries like the US, UK, Canada etc., many Indians staying in these countries prefer to park their excess funds in India to earn a handsome Interest on their surplus money.

To encourage Non Resident Indians (NRI’s) and Persons of Indian Origin (PIO’s) staying abroad to invest in India, the Govt has allowed these Individuals to open 3 types of NRI Account in India:-

  1. FCNR Account
  2. NRO Account
  3. NRE Account

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1. FCNR type NRI Account

FCNR stands for Foreign Currency Non Resident Account and can only be opened in Foreign Currency and not in the Indian Currency. It is a form of fixed deposit on which regular interest is paid. As Interest Rates in India (approx 7-8%) are much higher as compared to the interest rates in western countries (approx 1-2%), many NRI’s invest their surplus funds in fixed deposits in India through this type of NRI Account

Another benefit of this type of NRI Bank Account is that the investor will not have to bear any risk of fluctuations in the foreign currency. Say for eg: Mr A invests $10 in this form of NRI Account and the Interest Rate is 10% p.a., he would get $ 11 at the end of the year irrespective of the Rupee-Dollar exchange rates. And therefore in this form of NRI Bank Account, he is free from any foreign exchange risk.

This type of NRI Bank Account can be opened for a minimum of 1 year and a maximum of 5 years. Moreover, the interest earned on this form of NRI Bank Account is also exempted from tax in India.

For more details on this form of NRI Account, its features, procedures for opening the FCNR Account, permitted foreign currencies – kindly refer our detailed article on FCNR Account for NRI.

2. NRE type NRI Account

NRE Account i.e. Non-Resident External Account is a rupee denominated account and the amount in this type of account is freely repatriable. This type of NRI Account can either be in the form of Savings, Current, Recurring or Fixed Deposit.

As this form of NRI Account is rupee denominated, the investor will have to convert Foreign Currency into Rupees and in case he intends to take the funds back to his home country, he will again have to convert the Rupees into Foreign Currency

This form of NRI Bank Account is best suited for overseas savings which have been remitted to India by converting the foreign currency into INR.

For more details on this form of NRI Account, eligibility and documents required, kindly refer our detailed article on NRE Account for NRI’s.

3. NRO type NRI Account

NRO Account i.e. Non-Resident Ordinary Account is a rupee denominated account and can be in the form of savings or current or recurring or fixed deposit. The income which is deemed to accrue or arise in India can be deposited only this type of account. Examples of such forms of incomes are Rent, Dividend and Commission etc. Such incomes cannot be deposited in NRE Account.

Moreover, the interest earned on this form of account is also taxable as compared to NRE and FCNR Account in which Tax on Interest is not levied in India. TDS on Interest also deducted in this form of NRI Bank Account

For more details on this type of NRI Account, procedure to open the same and other related details, kindly refer our article on NRE type of NRI Account in India.

Apart from these 3 types of NRI Accounts, NRI’s can also invest in Shares and Real Estate in India. Recommended Read:-

A Personal Finance enthusiast, Karan is the founder of charteredclub.com and loves to discuss about Money related matters.