Non Resident Indian (NRIs) can hold and maintain FCNR, NRE and NRO types of accounts with banks in India. All the accounts differ depending on the need.
Let us understand more and know when to choose between NRI vs NRO vs FCNR accounts.
FCNR (B) deposit account is similar to a usual Bank FD account and provides nomination facility and the nominee for the account can be a resident Indian. Also, FCNR (B) can be closed prematurely however to be entitled to earn interest the deposit should remain with the bank for a minimum of 1 year.
A Non-Resident External Rupee Account (NRE Account) account may be in the form of savings, current, recurring or fixed deposit accounts with maturity of minimum one year. Such accounts can be opened only by the NRI himself and not through the holder of the power of attorney.
Any person resident outside India may open NRO account with an authorized dealer or an authorized bank for the purpose of putting through bona fide transaction in rupees. NRO accounts can be opened in the form of current, savings, recurring or fixed deposit accounts.
Difference between FCNR, NRE and NRO
|Particulars||FCNR (B) Account||NRE||NRO Account|
|Joint account of two or more NRIs||Permitted||Permitted||Permitted|
|Joint account with another person resident in India||Not Permitted||Not Permitted||Permitted|
|Currency in which account is denominated||Pound Sterling/ US Dollar/Jap.Yen/Euro||Indian Rupees||Indian Rupees|
|Repatriability – Principal||Freely repatriable||Freely repatriable||Not repatriable (except current income like rent, dividend, pension etc. and remittances indicated under "Repatriation of NRO Funds")|
|Interest||Freely repatriable||Freely repatriable||Freely repatriable|
|Foreign currency risk||Account holder is protected against changes in INR value vis-à-vis the currency in which the account is denominated.||Account holder is exposed to the fluctuations in the value of INR.||Account holder is exposed to the fluctuations, in the value of INR to the extent of interest amount.|
|Type of accounts||Term deposits only.||Current, Savings, Recurring, Fixed Deposits.||Current, Savings, Recurring, Fixed Deposits.|
|Period of fixed deposits||For terms not less than 1 year and not exceeding 3 years||For the periods as announced by the deposit taking bank.||For the periods as announced by the deposit taking bank.|
|Rate of interest||Banks are free to determine interest rates within the ceiling, if any, prescribed by the Reserve Bank||Banks are free to determine interest rates.||Banks are free to determine interest rates.|
|Rupee Loans in India to |
|Foreign currency loans outside India to |
It is important to note that the norms and differences between the NRE, NRO and FCNR Account keep changing. Let us give you a simple example. Until recently, one was not allowed to freely repatriate money from NRO acccount. Now there are norms that are changed. It is important when you decide on opening one of these accounts that you keep the tax consideration and the repatriation benefits in mind. Remember, that tax implications on a NRO account can be very high, when compared to an NRE or an FCNR account. If you are looking to maintain your money in foreign currency the best bet would be for a FCNR account. While we have done our best to explain the difference, in case you are still confused you may want to tak to your banker who could be of immense help in this regard.