Few days back I received an email query from one of my clients who has recently been deputed in client location in US by his company in India. He may stay there for the next two years. His query to me was;

“I am in US these days, and no plan to go back to India for next two years. I heard that I should be considered as an NRI and for this reason I should not use my bank account in India and I have to open separate NRI bank accounts, also I have to close all my resident India accounts. Is that true? Please guide what should I do?”

Here the concern is right, but not completely. It’s not that he has to completely close all his resident bank accounts and open separate account altogether.

Let me explain How & Why, but before that let us know who is an NRI;

Section 2(w) of FEMA (Foreign Exchange Management Act), 1999 defines a ‘person resident outside India’ as a person who is not resident in India. Any Indian Citizens staying abroad for employment/studies or for carrying on any business or on vacation or for any other purpose in circumstances indicating an indefinite period of stay outside India (except of Pakistan and Bangladesh).

Why to open NRI Bank Accounts?

Why because the Reserve Bank of India says so in its circular RBI/2007-2008/242 Master Circular No. 03 /2007-08.

On becoming an NRI, FEMA regulations want you to inform, within a reasonable time, all banks, where you have a Resident account, whether savings or fixed deposit, about the change in your status.

The banks will redesignate your accounts as NRO (Non Resident – Ordinary). You can use this account the same way as you used your Resident account before becoming an NRI (so! no need to close the resident India accounts).  Now the question may come how to convert the Resident account to NRO account?

You might want to read the article Comparison between NRE, NRO and FCNR Bank accounts

How to convert Resident account to NRO account:

  1. You may visit your bank branch and fill up the required forms. You would need to submit required numbers photographs (normally two), a copy of your passport and copy of your visa.
  2. If you have already moved to abroad (as per the above case), then don’t worry you can get copies of all your documents attested by the Indian Embassy or Notary and send them to the branch. Your bank branch will take of the care rest.

Do not worry about the payment of expenses being made from the resident account. You may continue to discharge your EMIs etc. as before from this NRO account also all the earning in India can be deposited in NRO account.

You might want to read the article Use 15CA & 15CB forms to transfer funds to Non-Residents

Along with the NRO account an NRI needs to open NRE (Non-resident External Accounts) account. An NRE account is a Rupee denominated account. Funds in NRE account is maintained in Indian rupees only. Source of funds into NRE accounts must be from your earnings abroad or from another NRE / FCNR account maintained in India. 

How to open NRI Bank Accounts?

NRIs/PIOs have been extended the facility to open an NRE/FCNR account from overseas, by downloading the form from the website of the bank of their choice.

Fyi, PIO (Person of Indian Origin) is a citizen of any country other than Bangladesh or Pakistan who had;

  1. at any time held Indian Passport or
  2. he or either of his parents or any of his grandparents was a citizen of India or
  3. the person is a spouse of an Indian citizen or a person referred to in (a) or (b).

Generally, the account opening form must be accompanied by

  1. 2 passport size latest photographs
  2. Copies of Passport and Residence Visa/ID Card/PIO Card
  3. Copies of any of Utility bills viz. fixed telephone/electricity bill, gas bill, water bill or council tax bill not older than three months. These utilities bills may be issued in your favour showing either your present residence abroad OR your permanent address in India

For opening account, initial foreign inward remittance to be sent by:

-Demand Draft /Mail Transfer in Foreign currency/INR
-Cashier’s Cheque/Personal Cheque in Foreign Currency/INR
-SWIFT/Wire/Telegraphic Transfer
-Foreign Currency/Traveller Cheques

The initial remittance must be sent along with the completely filled & signed account opening form and other required documents. The signatures on the form have to be verified by either officials at the Indian Embassy or consulate in the country of his residence or the Notary public. In case the particular bank has an overseas branch in the applicant’s city, documents can be verified at that office.

NRIs can empower a local citizen to operate their domestic accounts through a Power of Attorney or a letter of authority. NRIs can appoint nominees, resident Indians or otherwise, to their account.

Most important; there is no rocket science to open NRI account, you may find lots of middlemen calling or approaching you to help open the account, just avoid the middlemen to minimize any banking frauds.

How much time did you spend on opening such accounts? Was the procedure really hassle-free like most banks claim? Share your experience.

How & Why to open Non-Resident (NRI) Bank Accounts in India?

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