1

CHAPTER 1
NRI- BANKING- AN INTRODUCTION

As Per RBI Guidelines, The Residential Status Of An Indian Changsto That Of
The NON RESIDENT, On The Event Of His Stay Abroad Being Or Than 183 Days.
This Period Of 183 Days Is Not Applicable For Certain Cases Like Going Overseas For
Employment Or Business. It Is Mandatory To Inform The Bank Of Your Changes Of
Your Residential Status.

A View To Attract The Saving And Other Remittance Into India Through Banking
Channel From The Person Of Indian Nationality / Origin Who Are Residing Abroad And
Bloster The Balance Of Payment Position, The Government Of India Introduced In1970
Non Resident (External) Accounts Rules Which Are Governed By Exchange Control
Regulation, The Funds Field Helds In ( Non Resident (External) Accounts ( NRI
Accounts) Qualify For The Certain Benefits Like Exemption From Taxes In India , Free
Repatriation Facilities Etc.
2



Who is a non-resident Indian ( NRI )
An stays abroad for employment/ carrying on Indian Citizen who business or
vacation 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 Government and Public
Sector Undertakings on temporary assignments are also treated as non-resident) Non-
resident foreign citizens of Indian Origin are treated on par with non-resident indian
citizens.
What is an Overseas Corporate Bodies ( OCB ):
Overseas Corporate Bodies predominantly owned by Individuals of Indian
Nationality and origin resident outside India (OCBs) 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 Indian 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 as long as the ownership/Beneficial interest held in them by NRIs continues to
3

be at or above the level of 60%.
In order to establish that the ownership/beneficial interest in any OCB held by
NRIs is not less than 60%, the concerned corporate body/trust is required to furnish a
certificate from an overseas Auditor/Chartered Accountant/Certified Public accountant
in form OAC, where ownership/beneficial interest is directly held by NRIs, and in form
OAC-1 where it is held indirectly by NRIs.
NRE Account Example:
For example, a NRE Account can only be opened in India by an NRI or Non-
Resident Indian or by an Indian national who has lived outside of India for a period of
no less than 180 days in the previous year. A Non-Resident External or NRE Account is
typically opened using foreign currency and allows account holders to convert foreign
currency into Indian rupees at the prevailing exchange rate on the date of conversion.
An NRE Account also only allows for transfers in foreign currency, and the amount in
this type of account is able to be freely repatriated to India. Also, the account holder is
free to send funds out of India. The NRE Account is re-designated as a resident
account upon the holders return to India, with foreign currency in the account then
transferred to a Resident Foreign Currency or RFC account.

Persons of Indian Origin (PIO) - CARD SCHEME:
The Government has announced the launching of a People of Indian Origin
Card, which will allow visa free entry to Indian origin people living abroad and give
them all the rights enjoyed by Non-Resident Indians (NRIs) including purchase of non-
agricultural land. 15 million people of Indian origin living abroad will benefit from the
Card. The fee is US $ 1,000 and is valid for 20 years. However, it would not be issued
to people of Indian origin living in Pakistan and Bangladesh. It does not give voting
rights to the holders of the Card. It is eligible for the Indians who hold a foreign
passport living abroad till the fourth generation. The PIO Card holder would be exempt
from registration if his stay in India does not exceed 180 days. However, if the stay
exceeds 180 days, the PIO Card holder will have to register within 30 days of the
4

expiry of 180 days with the concerned Foreigners Registration Officer at district
headquarters. The right to buy property would not be valid to Jammu & Kashmir. The
PIO Card holder would be able to admit their children to educational institution in India
under the NRI category. These include the IITs and Indian institutes of Management.
They can also benefit from housing schemes of the Life Insurance Corporation, State
Governments and other Government agencies.

THE PRESS RELEASE AND GAZETTE NOTIFICATION ON PIO CARD FOLLOWS:
Understanding the sentiments of persons of Indian origin to be closer to their
original country and to reinforce their emotional bonds, as well as respecting their
desire to participate in the development of the resolve to frame a special scheme. This
resolve was translated in the first Budget Speech of FM: -
"Government have decided to draw up a scheme for issuance of a Persons of
Indian Origin (PIO) Card for those living abroad and having foreign passports. The PIO
Card, which would be extended to Persons of Indian Origin settled in countries to be
specified by Government would besides introducing a visa free regime, also confer
some special economic, educational, financial and cultural benefits. The details are
being worked out".
The Government has today launched a comprehensive Scheme for the Persons
of Indian Origin - called the "PIO Card Scheme". Under this scheme, Persons of Indian
Origin up to the fourth generation (great grand parents) settled throughout the world,
except for a few specified countries, would be eligible. The Card would be issued to
eligible applicants through the concerned Indian Embassies/ High Commissions/

Consulates and for those staying in India on long term visa, the concerned Foreigners
Regional Registration Officer (Delhi, Mumbai, Calcutta, and Chennai) would be the
same.
The fee for the card, which will have a validity of 20 years, would be US $1000.
Besides making their journey back to their roots simpler, easier and smoother, this
Scheme entitles the PIOs to a wide range of economic, financial, educational and
5

cultural benefits. The benefits envisaged under the Scheme include: -
(i) No requirement of visa to visit India:
(ii) No requirement to register with the Foreigners Registration Officer if continuous
stay does not exceed 180 days. If continuos stay exceeds 180 days, then registration
is required to be done within a period of 30 days of the expiry of 180 days:
(iii) Parity with Non-Resident Indians in respect of facilities available to the latter in
economic, financial, educational fields, etc. These facilities will include:-
(a) Acquisition, holding, transfer and disposal of immovable properties in India except
of agricultural/plantation properties;
(b) admission of children in educational institutions in India under the general category
quota for NRIs - including medical / engineering college, IITs, IIMs etc.
(c) various housing schemes of Life Insurance Corporation of India, State
Governments and other Government agencies;
(iv) All future benefits that would be extended to NRIs would also be available to the
PIO Card holders;
(v) However, they shall not enjoy political rights in India.
The above steps would go a long way in renewing and strengthening the emotional
bond amongst PIOs with the land of their origin. The attractive features of the Scheme
will further exhort them to play an increasingly constructive role in the socio-economic
and cultural development of the country of their origin.

MINISTRY OF HOME AFFAIRS NOTIFICATION
(i) This scheme may be called the Scheme for issuance of Person of Indian Origin
Card (PIO Card).
(ii) It shall come into force with effect from 31st March 1999.
2. Definition - In this scheme, unless the context otherwise requires.
(a) "Indian Mission" means the Embassy of Indian/ High Commission of India/ Indian
Consulate in a foreign country.
(b) "Person of Indian origin" means a foreign citizen not being a citizen of Pakistan,
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Bangladesh and other countries as may be specified by the Central Government from
time to time if.
(i) he/she at any time held a Indian passport; or
(ii) he/she or either of his/her parents or grand parents or great grand parents was
born in and permanently resident in India as defined in the Government of India Act,
1935 and other territories that became part of India thereafter provided neither was at
any time a citizens of any of the aforesaid countries (as referred to in 2(b)above; or
(iii) he/she is a spouse of a citizen of India or a person of Indian origin covered under
(i) or (ii) above.
(c) "PIO Card" means a card issued under this scheme.
3. Form of application for issue/ renewal of a PIO Card:-
An application for issue/renewal of a PIO Card shall be made in the prescribed form
and shall be accompanied by documentary evidence to show that the application is a
person of Indian origin as defined.
4. Authority to which application is to be made:-
(i) An application for issue of a PIO Card shall be made to an Indian Mission in the
country where the applicant is ordinarily resident.
(ii) Applicants already in India on Long Term Visa (more than one year) shall make the
application for issue of a PIO Card to the following authorities:-
(A) Those residing in:-
(a) Delhi
Foreigners Regional Registration Officer, Hans Bhavan, I.P.Estate New Delhi -
110002.
(b) Mumbai
Foreigners Regional Registration Officer, Annex II, Commissioner of Police, Craw Ford
Market, Mumbai - 400001.
(c) Calcutta
Foreigners Regional Registration Officer, 237, Acharya Jagdish Calcutta - 700020
(d) Chennai
Chief Immigration Officer, Bureau of Immigration, Shastri Bhavan Annex, No.26,
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Haddows Road,
Chennai- 600006.
(B) Those residing in areas other than (A) above:-
Joint Secretary (Foreigners). Ministry of Home Affairs, 1st floor, Lok Nayak Bhavan,
Khan Market New Delhi-110003.
5. Authority to grant a PIO Card:-
The authority to grant a PIO Card shall be an officer in an Indian Mission notified for
the purpose or the Joint Secretary Ministry of Home Affairs, Government of India or the
Foreigners Regional Registration Officer, New Delhi, Mumbai, Calcutta of the Chief
Immigration Officer, Chennai.
6. Validity of PIO Card:-
A PIO Card shall be valid for a period of twenty years subject to the validity of the
passport of the applicant.
7. Fee:-
A fee of US $1000, inclusive of US $250 (non-refundable) as processing fee, will be
payable along with the application. In case of rejection of the application, US $750
shall alone be refunded to the applicant.
8. Facilities to be extended to a PIO Card holder:-
(i) A PIO Card holder shall not require a visa to visit India.
(ii) A PIO Card holder will be exempted from the requirement of registration if his stay
in India does not exceed 180 days.
(iii) In the event of continuous stay in India of the PIO Card holder exceeding 180 days,
he / she shall have to get himself/ herself registered within 30 days of the expiry of 180
days with the concerned Foreigners Registration Officer at District Headquarter.
(iv) A PIO Card holder shall enjoy parity with NRIs in respect of all facilities available to
the latter in the economic, financial and educational fields except in matters relating to
the acquisition of agricultural/plantation properties. No parity shall be allowed in the
sphere of political rights.
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9. Cancellation of PIO Card:-
The Central Government may by order, cancel the PIO Card, if it is satisfied that:
(a) the PIO Card was obtained by means of fraud, false representation or the
concealment of any material
fact; or
(b) the PIO Card holder has shown himself by act or speech to be disaffected towards
the Constitution of India and other laws of India; or
(c) the PIO Card holder is a citizen or subject of any country at war with, or committing
external aggression against India; or of any other country assisting the country at war
with, or committing such aggression against India;or
(d) the PIO Card holder has been sentenced in India for indulging in acts of terrorism,
smuggling of narcotics, arms, ammunitions etc, or has been sentenced for committing
an offense punishable with imprisonment up to one year or fine up to rupees ten
thousand;or
(e) it is not conducive to the public interest that the person should continue to hold a a
PIO Card












9

KEY BENFITS OF NRI:
The NRI Bank account is one of the features of Indian banking system that is
quite useful for Indians living abroad or traveling all over the world. For those who have
one leg in India and the other abroad especially with banking needs on both sides of
the ocean the NRI account can be a handy tool. Some of the key benefits include:
Convenience: NRI account provides access to the banking system depending upon
the local and foreign needs. It allows quick transfer of funds and exchange of
currencies.
Time Saving: It gives easy access to your funds. You dont need to run to a Union
bank or call a friend in the middle of the night for a favor.
Diversification: Many of us, who have been scared by the banking system melt-down
in Europe or North America, this is one more way to diversify the savings or bank
accounts.
Interest: NRI bank account allows ability to compare interest rate and earning potential
between home and abroad.
Currency Hedge: This also provides the advantage of minimizing the risk of currency
rate fluctuations. If some of your savings are in rupees in India, and rest in dollars in
US, then you are effectively hedging against any downward slide in dollar. This could
also work against you if dollar value goes up.
Key steps to open an NRI Bank Account:-
To open the NRI account, following are the main steps:
1. NRI Or PIO status: The NRI status is pre-requisite for the account application. Make
sure you qualify, especially if you have been out of India only for a short period as a
visitor. For details, refer to the frequently asked questions on the official site of Indian
Government . The web-site also covers information for a person of Indian Origin (PIO)
and the qualifications for the account.




10





Non Resident Indians under FEMA :-
An Indian Citizen who stays abroad for (a) employment/ carrying on business or (b)
vacation outside India or (c) stays abroad under circumstances indicating an intention
for an uncertain duration of stay abroad is a non-resident. Persons posted in U.N.
organizations and officials deputed abroad by Central/ State Government and Public
Sector Undertakings on temporary assignments are also treated as non-resident.
Non-resident foreign citizens of Indian Origin are treated on par with non-resident
Indian citizens.

Who is a person of Indian Origin? :-
A. For the purpose 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,
ii. (ii) he or either of his parents or any of his grand parents was a citizen of India bu virtue
of the Constitution of India or Citizenship Act, 1956( 57 of 1955)
A spouse( not being a citizen of Pakistan or Bangladesh ) of an Indian citizen /Indian
origin is also treated as a person of Indian origin provided the Bank accounts are
opened or investments in shares/securities in India are made by such persons jointly
with their NRI spouses.

B. For Investment 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).


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NON RESIDENT INDIANS UNDER INCOME TAX ACT :

The laws in this regard are quite complicated as these it does not define who is
non resident. Rather these define who is resident and who are not ordinarily
resident. Therefore, if a person does not fall in the category of resident or not
ordinarily resident, he / she will be non-resident.
Residential status of an individual or HUF or a company is of great importance in Indian
Income Tax Act as the liability to pay tax in India does not depend on the nationality or
domicile of the Tax payer but on his residential status. Residential Status is
determined on the basis of physical presence i.e. the number of days of stay in India in
any year. There are three types of status based on the stay in India:-
(1) Resident:
a. An individual is resident if any of the following conditions are satisfied:
(i) he stayed in India for 182 days or more during the previous year, or
(ii) he stayed in India for 365 days or more during the four preceding years and
stays in India for atleast 60 days 9 182 days in case of an Indian citizen or a
person of Indian Origin coming on a visit to India or 182 days in case of an Indian
citizen going abroad for an employment ) during the previous year.

Stay in India for the above criteria may be continuous or intermittent.

b. Hindu Undivided Family (HUF) or firm or other Association of persons is resident of
India except in cases where the control and management of its affairs is wholly situated
outside India in the previous year
(c) A company is resident in India if-
i. it is an Indian company, or
ii. 9ii) during the previous year, the control and management is situated wholly in India.
iii. A person resident in India, in a previous year in respect of any source of income shall
be deemed to be resident in India in respect of his other sources of income.
(2) Non-Resident
A person is non-resident if he is not resident in India.




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(3) Resident but not ordinarily resident
An individual or an HUF is treated to be not ordinarily resident in India in any previous
year if he or the manager of HUF-
a. has not been resident in India in 9 out of 10 previous years preceding the previous
year; or
b. has not during the seven previous years preceding that year, been in India for a period
of or periods amounting in all to 730 days or more.
c. Thus according to condition in clause (a) a newcomer to India would remain not
ordinarily resident in India for the first 9 years of his stay in India. Similarly, in case
where a person who is resident in India goes abroad and ceases to be resident in India
for at least 2 years, he would upon his return, be treated as, not ordinarily resident
for the next 9 years.

How the residential status of a person is determined :-
i. In case of Indian citizen who leaves Indian during previous year for the purpose of
employment :-
Such a person is resident in India if he satisfies the following conditions:
a. He stays in India for at least 182 days during the previous year.
b. He is resident in India for at least 9 out of 10 years preceding the previous year.
c. He is resident in India for at least 730 days during 7 years preceding the previous year.
d. If such a person satisfies condition (a) but does not satisfy either of the conditions at (b)
or (c) above, such a person would be resident but not ordinarily resident.
Such person would be non-resident if he does not satisfy condition (a) stated above.

i. In case of Indian citizen or a person of Indian origin living abroad comes to India for a
visit during the previous year
The residential status of such a person is to be determined after looking into the
following
a. He stays in India for at least 182 days during the pervious year and,
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TYPE OF ACCOUNT:
Savings Accounts
These are intended to provide an incentive for you to save money. You can make
deposits and withdrawals, but usually cant write checks. They usually pay an interest
rate thats higher than a checking account, but lower than a money market account or
b. He is resident in India for at least 9 years out of 10 years preceding the previous year.
c. He is resident in India for at least 730 days during seven years preceding the previous
year.

The person would be resident in India if he satisfies all the conditions (a) to (c) above.
The person would be resident but not ordinarily resident if he satisfies the condition at
(a) but does not satisfy any or either of the conditions at (b) and (c) above.
The person would be non-resident if he does not satisfy the condition at a) above.
Thus condition (a) is of fundamental importance and must be satisfied to be resident in
India. Conditions ( b) and (c) only help to qualify that resident status.

i. In case of any other individual
For individuals other than those included in category ( I ) or (ii), we have to look into the
following four conditions to determine the residential status:
a. He stays in India for at least 182 days during the previous year.
b. He stays in India for at least 60 days during the previous year and for at least 365 days
during 4 year preceding the previous year.
c. He is resident in India at least in 9 out of 10 years preceding the previous year.
d. He is resident in India for at least 730 days during 7 years preceding the previous year.
A person would be resident in India if he satisfies any of the conditions at (a) or (b) and
both the conditions at (c) and (d) i.e. he either satisfies conditions (a) , (c) and (d) or (b),
(c) and (d).
A person would be resident but not ordinarily resident if he satisfies either of the
conditions at (a) or (b) and does not satisfy both or either of the conditions at (c) and
(d). In other words, if a person satisfies condition (a) or (b) only but does not satisfy
either (c) or (d) or both, he would be treated as resident but not ordinarily resident in
India.
If a person satisfies neither of the conditions (a) or (b) , he is non-resident.

14

CD. Some savings accounts have a passbook, in which transactions are logged in a
small booklet that you keep, while others have a monthly or quarterly statement
detailing the transactions. Some savings accounts charge a fee if your balance falls
below a specified minimum.
Basic Checking Accounts
Sometimes also called no frills accounts, these offer a limited set of services at a low
cost. Youll be able to perform basic functions, such as check writing, but they lack
some of the bells and whistles of more comprehensive accounts. They usually do not
pay interest, and they may restrict or impose additional fees for excessive activity, such
as writing more than a certain number of checks per month.
Interest-Bearing Checking Accounts
In contrast to no frills accounts, these offer a more comprehensive set of services, but
usually at a higher cost . Also, unlike a basic checking account, you are usually able to
write an unlimited number of checks. Checking accounts which pay interest are
sometimes referred to as negotiable order of withdrawal (NOW) accounts. The interest
rate often depends on how large the balance in the account is, and most charge a
monthly service fee if your balance falls below a preset level.
Money Market Deposit Accounts (MMDAs)
These accounts invest your balance in short-term debt such as commercial paper,
Treasury Bills, or CDs. The rates they offer tend to be slightly higher than those on
interest-bearing checking accounts, but they usually require a higher minimum balance
to start earning interest. These accounts provide only limited check writing privileges
(three transfers by check, and six total transfers, per month), and often impose a
service fee if your balance falls below a certain level.

Certificates of Deposit (CDs)
These are also known as time deposits, because the account holder has agreed to
keep the money in the account for a specified amount of time, anywhere from three
months to six years. Because the money will be inaccessible, the account holder is
rewarded with a higher interest rate, with the rate increasing as the duration increases.
15

There is a substantial penalty for early withdrawal, so dont select this option if you think
you might need the money before the time period is over (the maturity date).






















16

Chapter 2
LITERATURE REVIEWS OF THE INDIAN BANKING SYSTEM

Literature reviews that Indian banking system consist of a larger structure on of
financial institutions, Commercial banks, foreign financial institutions. These structural
transformations of Indian finance system can be divided into three parts. First, the post
independence period (1947-1968). The Reserve bank of India, performed role as a
supervisor and controller of finance system. RBI, dominated over all the forms of
finance controls in India. In this time RBI, worked on financial stability, credit control,
and regulation of interest rates and formation banking structure. The second financial
repression, period <1969 to 1990> the movement commenced with the nationalization
of banks. This nationalization of commercial banks derives the base for changes in
finance and banking system.
The result into interest rate regulation and credit programmers deposit and
banking working methods etc. The third period known as financial reform and
liberalization period. Started in early 90s. In that period government of India was more
likely to more liberalized. The three committee in 1985, vagual in 1987 and the
Narasimham committee 1991. The most influential recommendations made by the
committee of Narasimham regarding liberalization, consolidation and privatization in
banking system. And the government of India started a financial reform era with the
financial sector liberalization program. The main aims of financial liberalization program
is to regulate the rates of interest, cash reserves and performance financial system
consist of financial institute stocks exchanges and banks. It makes liberalization
program enhance the importance of banking sector and make it more efficient and

The globalization, deregularisation and privatization system emphasized on
Washington consensus. These leads country to simplistic way of transforming system
by functioning of market and state owned institutions restructuring. The liberalization
program made changes internal economy. It restated more competitive and productive
in shorter period. The liberal interest rates and reserve limits of banks resulted into
stable and sound borrowing and lending market and monetary policy of government.
The bank requires to keep certain amount of reserves to avoid too uncertainty an future
due to competitive market another element of banking reforms is stabilization, non
17

performing loan, which burdensome for banks are recapitalized and require standard
working environment one of the most effective part is alteration of state owned banks
into private sector banks. Under the government controls state owned banks
recommends to sell out its public portion to private sector and consume the public
property in other economic project which needs more funds and these funds are taken
from the privatization of state owned banks.
Under the Nationalization act 1969, the largest banks were nationalized with the
aim of increase in public deposits. The reason behind the nationalization of banks to
grow the economy and bank network expansion. The government of India requires
enhancing the economy and serving to prior areas. In 1980, more six banks were
nationalized added into public share in banks to keep landing to priories areas. It was
material to control on banking system and resulted into increase in priority area landing
and five year plans of Indian Government. Moreover, these turned into inefficiency in
banking system instead of providing equal distribution of funds. Addition banking
system faced problems in 1980s these are the period of unprofitability and inefficiency
and in mid 80s creates more limitations on returns and capital and reserves. These
leads banks to the unrealistic performance standards. As mention above the 1991
Narasimham committee caters a influencing idea on banking sector reforms which
idealized on interest rate deregulation, credit services and entry of new banks on Indian
market private as well as foreign banks.
Before the committee, interest rates were medium of subsidiary between
different sectors of economy. Deregulation of interest rates was major part of making
reforms that gave growth to financial savings and improve organizational finance
system. On the other hands committee recommended total liberalization on deposits
rates. In 2004 RBI set only rates for the savings and NRI deposits rates rest of the other
deposits banks are free to levy their rates. The last major recommendation of
committee was on entry of new banks in Indian market. Before it was a limited authority
to the banks to do with interest rates and deposits, there were totally restrictions for
new banks entry. Due to liberal view of new banks entry in Indian market seven private
and twenty foreign banks started their operations in India after 1990. As per RBI (2004),
the liberal aspect of new banks entry improved the quality of operation, risk
management, technological changes and competition.
In addition, before 1990 public sector bank distorted market system by its non
profitability and inefficient management. To recover the stability in market Government
18

inject more funds in 1993 and 1999 to liquidate the government and depositors bear
loses through public sector banks. In 1995 SBI act framed partial privatization of public
sector banks and SBI was the first bank to get funds in form of equity and become
private sector bank. Despite of partial privatization Government decide to increase the
private holding up to 49 percentage and to control banking system appointment was
made for a public agent to control administrative strategies after all the changes have
been made the Indian banking sector covers several changes and explore the
improvement effect.
In case of privatization of Indian banks there are only interest rates, credit control
and deposits rates to know the changes in economy are increase in savings. It predicts
the removal of deposit policy in baking will lead to increase in capital availability these
can make changes in private sector capital formation. The interest rates make vary
forms the fixed deposit rates, lending rates are increased and steadily decline in 1990
which effect on todays market. The Repressioninst policy reduction improves the risk
management of banks it is an indication of liquidity. The liberalization treated as an
instrument of financial policy reformation of credit rates and statutory lending rates the
division of two rates in minimum and maximum can gradually effect the repressive of
monetary policy. As the liberalization program aimed to make banks more efficient and
productive to compose the efficiency of banking sector based on technical efficiency,
scale and scope efficiency called parametric and non parametric efficiency. The
parametric methods considered banking returns and input like production and profit,
cost, revenue to know how effective bank is performing.









19

CHAPTER 3
DEPOSITORY SCHEME FOR NRIS
Non resident indians (nris) and persons of indian origin (pios) can open and
maintain nre accounts with authorized dealers and with banks( including co-operative
banks) authorized by the reserve bank of india (rbi) to maintain such accounts.
The account has to be opened by the non resident account holder himself and
not by the holder of the power of attorney in india.
Opening nre accounts in the name of individuals / entities of Bangladesh /
Pakistan nationality / ownership requires approval of rbi.
Types of accounts :- saving current , recurring or fixed deposite scheme.
NON RESIDENT SAVINGS ACCOUNT
NRE SAVING ACCOUNT
FCNR ACCOUNT
NRO ACCOUNT

NRE Savings Account
NRE Savings Account lets you transfer your earnings to India conveniently with
complete security. You can repatriate the funds held in the account along with the
interest earned at any point of time and you don't even have to pay tax on the interest
amount. With a host of direct banking channels available at your fingertips, you can
stay in complete control of your hard-earned income abroad
Features & Benefits:
Rupee denominated Savings Account
Funds held in this account and interest thereof is fully repatriable
Debit Card which gives you access to your account over 1 million master card ATM's
Personalized cheque book


Mandate facility for your loved ones in India with an Domestic Debit card to access
your account while you are away
20

Easy account funding through our alliances with correspondent banks worldwide
Internet banking facility for 24-hour access to your account while ensuring the highest
level of security
Pay your bills online using our online bill payments facility
Enjoy an enhanced spending limit and cash withdrawal limit depending on the
account variant availed.
Our inter-city banking facility allows you to bank at any of our branches during your
visit to India
NRO & NRE Savings account balances are grouped** allowing you the flexibility to
maintain balances in either of accounts
Interest:
W.e.f. December 22, 2011, interest for all rupee savings accounts will be calculated
on the daily closing balances maintained in the account
The Interest rate will be calculated @ 7% p.a.* for balance more than Rs. 1 lakh & 6%
p.a.* for balance up to Rs. 1 lakh
Taxation:
NRE Savings Accounts are exempt from tax in India
Debit & credits:-
Payments for local expenses and investments are allowed freely, credits to an
account, of funds emanating from a local source be permissible only if funds are of a
repartiable nature.
Permited credits
Proceeds of remittances to india can be in any permitted currency.
Proceeds of personal cheques drawn by the account holder on his foreign
currency account and of travelers cheques, bank drafts payable in any
permitted currency including instruments expressed in Indian rupees for
which reimbursement will be received in foreign currency, deposited by
the account holder inperson during his temporary visit to india provided
the authorized dealer/bank is satisfied that the account holder is still
resident outside india, the travelers cheques/drafts are


21


standing/ endorsed in the same of the account holder and in the case of
travelers cheques, and they were issued outside india.
Proceeds of foreign currency / bank notes tendered by account holder
during histemproray visit to india, provided
I. The amount was declared on a currency declaration form (cdf)
where applicable and
II. The notes are tendered to the authorized dealer in person by the
account holder himself and the authorized dealer is satisfied that
account holder is a person resident outside india.
Permitted debits
Local disbursements
Remittances outside india
Transfer to NRE / FCNR accounts of the account holder or any other person
eligible to maintain such account.
Investment in shares / securities / commercial paper of an Indian company or for
purchase of immovable property in india within prescribed regulations.
Any other transactionif covered under general or special permission granted by
the reserve bank.
Tate of interest :- as per the directives of the reserve bank of india.
Loan against security of funds held in the accounts
To the account holder
i. For personal purpose or for carrying on business activities (except
agricultural/plantation activities / investment in real eatate business.)
ii. For making direct investment in india on non-repartitation basis.
iii. For acquisition of flat / house in india for his own residential use.
In January 2007, the rbi imposed a restriction on loans against deposite and securities
for nri to a maximum of up to rs.20 lakh.

To third parties
22

The loan should be utilized for personal purpose or for carrying on business
activities ( other than agricultural / plantation activities / real estate business).
the loan should not be utilized for re-lending.

Loans outside india
Authorized dealers may allow their overseas branches / correspondents to grant
funds based and / or non fun based facilities to non resident depositors against
the security of funds held in the nre accounts and also agree to remittance of
funds from india if necessary, for liquidation of debts.

Change of resident status of account holder
Nre accounts should be re designated as resident account or the funds held in
theses accounts may be transferred to the resident foreign currency (rfc)
accounts ( if the account holder is eligible for maintaining rfc account) at the
option of the account holder immediately upon the return of the account holder to
india (except where the account holder is on a short visit to india).

Repatriation of funds to non resident nominee can be permitted by the
authorized dealer or bank in the case of an account holder who is deceased.

Other features:-
Joint accounts in the name of the two or more non resident individuals may be
opened provided all the account holder are persons of india nationality or origin.
When one of the joint holder become residents, the authorized dealer may either
delete his name or allow the account to continue as nre account or redesignate
the accountas resident account at the option of the account holders. Opening of
these accounts by a non resident jointly with a resident is not permissible.
An account may be opened in the same of eligible nri during the temporary visit
to india.
Operation by power o attorney- resident power of attorney holder can operate
on the nre accounts but only for local payment to be made ob behalf of the
account holder.


23

The power of attorney (poa) holder cannot credit proceeds of foreign currency
notes / bank notes and travelers cheques to the nre accounts.
In cases where the account holder or a bank designed by him has been granted
permission by reserve bank to make investments in india, the poa holder is
permitted to operate the account to facilitate such investments. Poa holders
cannot, however, make gift fromnre accounts.

Foreign currency ( non resident Indians) fcnr(b) account
Eligibility to open and maintain fcnr a/c
With the exception of person of Indian origin from Bangladesh and Pakistan, all
nris and pios are eligible to maintain an fcnr account with an authorized bank in
india.
Accounts may be opened with funds remitted from ouside, existing nre / fcnr
accounts, etc.
Remittances should be in the designed currency.
Conversion to currency other than the designated currency also permitted at the
risk and cost of the remitter.

Features of fcnr account
The account can be opened with funds remitted from abroad, or transferred from
an existing nre / fcnr account.
Fcnr accounts can be opened with designed currencies, which are: gbp, usd,
deustsche mark, Japanese, yen and the euro.
Conversion to another designated currency is permitted at a cost to the account
holder.
Only term deposite can be maintainedin fcnr accounts, in a time range of 6
month to 3 years.
As per rbi guidelines,banks are free to offer interest on fcnr deposits below libor
rates, less 25 basis points for deposites between 6 months to one years, and
libor rates plus 520 basis points for deposite over a years.
24

Banks are also free to decide on a fixed or a floating rate of interest on fcnr term
deposites.
Interest rates are reviewed periodically and determined by directives from the
reserve bank ( department of banking operation and development).
The account holder can choose the periodicity of interest, form half-yearly to
annual payments. The interest can be credited to a new fcnr (b) account or a
nre /nro account.
For permissible debits and credits, the regulations for fcnr accounts are similar to
the nre accounts.
For conversion of currencies, from designated currency to rupees and vice
varsa, the days rate of conversion will apply.
Funds from the fcnr accounts are allowed to move within the country at no extra
cost to the accounts holder.
For loan and overdrafts against fcnr acoounts, th same condition as the nre
accounts apply.
In case of premature withdrawal of the fcnr term deposit, a penalty Is levied,
interest paid on the account its calculated at a
1 % below the committed rate if accunts are closed prematurely
However, no interest is paid on deposits held for less than 6 months, and a
penalty would have to be paid as per directives from the apex bank. The rbi
guidelines prevail on these terms, issued as and when required.
NRI Bank Accounts | NRE/NRO Savings Accounts
For the Global Indian, a Non Resident External and a Non Resident Ordinary (NRO)
Savings Account with YES BANK spells convenience. An NRE and NRO Savings
Account with YES BANK means ease of access to your money- both for you and your
family back in India.

Non-Resident Ordinary Rupee Account (NRO Account)
Any person resident outside India may open NRO account with an authorised dealer or
an authorised bank for the purpose of putting through bona fide transaction in rupees.
25

Opening of accounts by individual/ entities of Pakistan and entities of Bangladesh
require prior approval of Reserve Bank of India.
NRO accounts may be opened / maintained in the form of current, savings, recurring or
fixed deposit accounts.
Savings Account - Normally maintained for crediting legitimate dues /earnings /
income such as dividends, interest etc. Banks are free to determine the interest rates.
Term Deposits - Banks are free to determine the interest rates. Interest rates offered
by banks on NRO deposits cannot be higher than those offered by them on comparable
domestic rupee deposits.
Account should be denominated in Indian Rupees.
Permissible credits to NRO account are transfers from rupee accounts of non-
resident banks, remittances received in permitted currency from outside India through
normal banking channels, permitted currency tendered by account holder during his
temporary visit to India, legitimate dues in India of the account holder like current
income like rent, dividend, pension, interest, etc., sale proceeds of assets including
immovable property acquired out of rupee/ foreign currency funds or by way of legacy/
inheritance.
Eligible debits such as all local payments in rupees including payments for
investments as specified by the Reserve Bank and remittance outside India of current
income like rent, dividend, pension, interest, etc., net of applicable taxes, of the account
holder.
NRI/PIO may remit from the balances held in NRO account an amount not exceeding
USD one million per financial year, subject to payment of applicable taxes.
The limit of USD 1 million per financial year includes sale proceeds of immovable
properties held by NRIs/ PIOs.
Other than current income and the limit of USD 1 Mn per financial year applicable to
NRIs/PIOs, balances in NRO accounts cannot be repatriated without the prior approval
of RBI.
26

The accounts may be held jointly with residents and / or with non-resident Indian.
The NRO account holder may opt for nomination facility.
NRO (current/savings) account can also be opened by a foreign national of non-
Indian origin visiting India, with funds remitted from outside India through banking
channel or by sale of foreign exchange brought by him to India. The details of this
facility are given in the FAQs on Accounts opened by Foreign Nationals and Foreign
Tourists available on the RBI website.
Loans to non-resident account holders and to third parties may be granted in Rupees
by Authorized Dealer / bank against the security of fixed deposits subject to certain
terms and conditions.
NRI Bank Accounts | NRE/NRO Savings Accounts
For the Global Indian, a Non Resident External and a Non Resident Ordinary (NRO)
Savings Account with YES BANK spells convenience. An NRE and NRO Savings
Account with YES BANK means ease of access to your money- both for you and your
family back in India.

NON RESIDENT SAVINGS ACCOUNT
NRE Savings Account
NRO Savings Account
SeaFarer Account
NRE Savings Account
NRE Savings Account lets you transfer your earnings to India conveniently with
complete security. You can repatriate the funds held in the account along with the
interest earned at any point of time and you don't even have to pay tax on the interest
amount. With a host of direct banking channels available at your fingertips, you can
stay in complete control of your hard-earned income abroad
Features & Benefits:
Rupee denominated Savings Account
Funds held in this account and interest thereof is fully repatriable
27

Debit Card which gives you access to your account over 1 million master card
ATM's
Personalized cheque book
Mandate facility for your loved ones in India with an Domestic Debit card to
access your account while you are away
Easy account funding through our alliances with correspondent banks worldwide
Internet banking facility for 24-hour access to your account while ensuring the
highest level of security
Pay your bills online using our online bill payments facility
Enjoy an enhanced spending limit and cash withdrawal limit depending on the
account variant availed.
Our inter-city banking facility allows you to bank at any of our branches during
your visit to India
NRO & NRE Savings account balances are grouped** allowing you the flexibility
to maintain balances in either of accounts
Interest:
W.E.F. December 22, 2011, interest for all rupee savings accounts will be calculated
on the daily closing balances maintained in the account
The Interest rate will be calculated @ 7% p.a.* for balance more than Rs. 1 lakh & 6%
p.a.* for balance up to Rs. 1 lakh
Taxation:
NRE Savings Accounts are exempt from tax in India








28

Chapter 4
RBI ISSUES GUIDLINES FOR MONEY TRANSFER SCHEME
Money Transfer
Money can be transfer either through on line or drafts or telegraphically or by
wire transfer or cheque. E- transfer is completely online, paperiess money transfer
service which enable the customer to send money directly from one bank account in
foreign country to india . Drafts in india rupees can be purchased from exchange
companies of one country and mailed to the branch of another country where the
customer has the account. Telegraphic or wire transfers can be made through branch.
Cheques can be deposited for credit of the customers accounts and the cheques will
be collected and credited to their accounts.

International SWIFT Transfer
This is a secure, quick and efficient method of transferring funds, which enables
you to send money easily to any bank which is part of the SWIFT network. There is
flat- rate charges of Rs.500 fir each SWIFT transfer made from your account. There is
no charges when you make a transfer from your Barclays NRI accounts in india to a
Barclays account in UK or UAE.

(Demand Or Bankers ) Draft
This is a means of initiating a transfer from your account to a named payee. You
cand send the demand draft to your intended payee, who will then be able to take the
draft into their bank following presentation of this draft, he / she will the receive
payment
A demand draft made payable to a non Barclays accounts will incur a charge
of rs 3.5 per rs 1,000 sent ( minimum charge rs 100.)
A demand draft made payable to a Barclays account and a foreign currency dd
will incur a flat rate charge of rs. 300.

29

UAE Exchange
Providing speed, convenience and security of transaction, the xpress money
service of UAE exchange company is providing to be a modern and reliable way of
sending and receiving money from anywhere in the world, especially among the
immigrant Indian in gulf countries. With an extensive network of branches in uae and a
global presence in Australia, India, Kuwait, Oman , Quatar, UK, USA, Fiji, Sri Lanka
and Bangladesh , the UAE exchange centre specialize in fund transfer across the globe
and enjoys a numerous uno status in the industry. UAE exchange and financial
services ltd makes 80000 remittances a month. The average amount of remittances per
transfer is Rs. 125000.

Western Union Monery Transfer
Western union is a global leader in money transfer services, with a history of
pioneering dating back more than 150 years. Non resident Indians can now transfer
their funds to India through the money transfer service offered by western union. This
service is currently available for inward remittances in India. credits to NRE / FCNR
accounts are not permitted to be routed through money transfer service scheme
(MTSS)

Sendwise:-
A rupee demand draft delivered to the recipients doorstep within three to four
working days and can be encashed at any nationalized bank in India.

Moneygram Send Money Online Today :-
you can send money around the world online to over 84,000 moneygram agent
locations, in more than 170 countries, not only is sending money with moneygram safe
and convenient, youll find the same day sevices to be one fastest way to send your
money online usually arriving within minutes. Send money online or at a moneygram
agent location near you. Moneygram is a global leader ininternational money transfer
30

and the largest processor of money orders in the U.S. we help people and business by
providing affordable, reliable and convenient payment services






















31

Chapter 5
NRIs RBI Guideline on Investment

RBI Guidelines specific to Investment in Immovable Property for Non Resident
Indians (NRIs) and Persons of Indian Origin (PIOs)
NOTE: The below stated information has been taken from the FAQs section of the
Reserve Bank of India, which was last updated on the 6th April 2011. We aim to keep
updating this section with relevant information from time to time, however to ensure you
have the latest information,
In terms of the Foreign Exchange Management Act (FEMA), 1999 a person
resident outside India means a person who is not resident in India.
Q: What are the different types of accounts that can be maintained by an NRI1/
PIO2 in India?
If a person is NRI or PIO, s/he can, without the permission from the Reserve Bank,
open, hold and maintain the different types of accounts given below with an Authorised
Dealer in India, i.e., a bank authorised to deal in foreign exchange. NRO Savings
accounts can also be maintained with the Post Offices in India. However,
individuals/entities of Bangladesh and Pakistan require the prior approval of the
Reserve Bank.
Types of accounts which can be maintained by an NRI/PIO in India
NRO accounts may be opened/maintained in the form of current, savings, recurring or
fixed deposit accounts.
Savings Account Normally maintained for crediting legitimate
dues/earnings/income such as dividends, interest, etc. The interest rates on NRO
Savings deposits shall be at the rate applicable to domestic savings deposits.
Currently the interest rate is 3.5 per cent.
Term Deposits Banks are free to determine the interest rates.
Account should be denominated in Indian Rupees.
32

Permissible credits to NRO account are transfers from rupee accounts of non-
resident banks, remittances received in permitted currency from outside India
through normal banking channels, permitted currency tendered by account holder
during his temporary visit to India, legitimate dues in India of the account holder
like current income like rent, dividend, pension, interest, etc., sale proceeds of
assets including immovable property acquired out of rupee/foreign currency funds
or by way of legacy/ inheritance.
Eligible debits such as all local payments in rupees including payments for
investments as specified by the Reserve Bank and remittance outside India of
current income like rent, dividend, pension, interest, etc., net of applicable taxes, of
the account holder.
NRI/PIO may remit from the balances held in NRO account an amount not
exceeding USD one million per financial year, subject to payment of applicable
taxes.
The limit of USD 1 million per financial year includes sale proceeds of immovable
properties held by NRIs/PIO.
The accounts may be held jointly with residents and/or with non-resident Indian.
The NRO account holder may opt for nomination facility.
NRO (current/savings) account can also be opened by a foreign national of non-
Indian origin visiting India, with funds remitted from outside India through banking
channel or by sale of foreign exchange brought by him to India. The details of this
facility are given in the FAQs on Accounts opened by Foreign Nationals and
Foreign Tourists available on the RBI website.
Loans to non-resident account holders and to third parties may be granted in
Rupees by Authorised Dealer/bank against the security of fixed deposits subject to
certain terms and conditions.


B. Non-Resident (External) Rupee Account (NRE Account)
NRE account may be in the form of savings, current, recurring or fixed deposit
accounts. Such accounts can be opened only by the non-resident himself and not
through the holder of the power of attorney.
NRE accounts cannot be held jointly with residents
33

Account will be maintained in Indian Rupees. Balances held in the NRE account are
freely repatriable.
Accrued interest income and balances held in NRE accounts are exempt from Income
tax and Wealth tax, respectively.Authorised dealers/authorised banks may at their
discretion/commercial judgement allow for a period of not more than two weeks,
overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the
condition that such overdrawings together with the interest payable thereon are
cleared/repaid within a period of two weeks, out of inward remittances through normal
banking channels or by transfer of funds from other NRE/FCNR accounts.
Savings The interest rates on NRE Savings deposits shall be at the rate applicable to
domestic savings deposits. Currently the interest rate is 3.5%.
Term deposits The interest rates are stipulated by the Department of Banking
Operations and Development, Reserve Bank of India. At present, with effect from the
close of business in India on November 15, 2008, interest rates on NRE deposits for
one to three years should not exceed the LIBOR/SWAP rates plus 175 basis points, as
on the last working day of the previous month, for US dollar of corresponding
maturities.
The interest rates as determined above for three year deposits will also be applicable in
case the maturity period exceeds three years.
Permissible credits to NRE account are inward remittance to India in permitted
currency, proceeds of account payee cheques, demand drafts/bankers cheques,
issued against encashment of foreign currency, where the instruments issued to the
NRE account holder are supported by encashment certificate issued by AD Category-
I/Category-II, transfers from other NRE/FCNR accounts, interest accruing on the funds
held in such accounts, interest on Government securities/dividends on units of mutual
funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of
refunds, etc.
34

Eligible debits are local disbursements, transfer to other NRE/FCNR accounts of person
eligible to open such accounts, remittance outside India, investments in
shares/securities/commercial paper of an Indian company, etc.
Loans up to Rs.100 lakh can be extended against security of funds held in NRE
Account either to the depositors or third parties.
Such accounts can be operated through power of attorney in favour of residents for
limited purpose of withdrawal of local payments or remittances through normal banking
channels to the account holder himself.
C. Foreign Currency Non Resident (Bank) Account FCNR (B) Account
FCNR (B) accounts are only in the form of term deposits of 1 to 5 years
All debits/credits permissible in respect of NRE accounts are permissible in
FCNR (B) accounts also.
Account can be in Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian
Dollar and Australian Dollar
In case the depositor with any convertible currency other than designated
currency desires to place a deposit in these accounts, authorised dealers may
undertake with the depositor a fully covered swap in that currency against the desired
designated currency. Such a swap may also be done between two designated
currencies.
Loans up to Rs.100 lakh can be extended against security of funds held in
FCNR(B) deposit either to the depositors or third parties.
The interest rates are stipulated by the Department of Banking Operations and
Development, Reserve Bank of India. At present, in respect of FCNR (B) deposits of all
maturities contracted effective from the close of business in India as on November 15,
2008, interest shall be paid within the ceiling rate of LIBOR/SWAP rates plus 100 basis
points for the respective currency/corresponding maturities (as against LIBOR/SWAP
rates plus 25 basis points effective from close of business on October 15, 2008).On
35

floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the
respective currency/maturity plus 100 basis points. For floating rate deposits, the
interest reset period shall be six months.
When an account holder becomes a person resident in India, deposits may be
allowed to continue till maturity at the contracted rate of interest, if so desired by him.
Terms and conditions as applicable to NRE accounts in respect of joint
accounts, repatriation of funds, opening account during temporary visit, operation by
power of attorney, loans/overdrafts against security of funds held in accounts, shall
apply mutatis mutandis to FCNR (B).

Q: Is the permission of the Reserve Bank required for opening the various
accounts, mentioned above, by Bangladesh/Pakistan individuals/entities?
Opening of accounts by individuals/entities of Bangladesh/Pakistan nationality requires
prior approval of the Reserve Bank. All such requests may be referred to the Chief
General Manager-in-Charge, Foreign Exchange Department, Foreign Investment
Division, Reserve Bank of India, Central Office, Mumbai 400 001.
Q: Can an individual resident borrow money from his close relatives outside
India?
Yes, an individual resident can borrow sum not exceeding USD 250,000 or its
equivalent from his close relatives staying outside India, subject to the conditions that:
i) the minimum maturity period of the loan is one year;
ii) the loan is free of interest; and
iii) the amount of loan is received by inward remittance in free foreign exchange through
normal banking channels or by debit to the NRE/FCNR account of the NRI.
Q: What are the other facilities available to NRIs/PIO?
A. Investment facilities for NRIs
NRI may, without limit, purchase on repatriation basis:
36

Government dated securities/Treasury bills
Units of domestic mutual funds;
Bonds issued by a public sector undertaking (PSU) in India.
Non-convertible debentures of a company incorporated in India.
Perpetual debt instruments and debt capital instruments issued by banks in India.
Shares in Public Sector Enterprises being dis-invested by the Government of
India, provided the purchase is in accordance with the terms and conditions
stipulated in the notice inviting bids.
Shares and convertible debentures of Indian companies under the FDI scheme
(including automatic route and FIPB), subject to the terms and conditions specified
in Schedule 1 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as
amended from time to time.
Shares and convertible debentures of Indian companies through stock exchange
under Portfolio Investment Scheme, subject to the terms and conditions specified
in Schedule 3 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as
amended from time to time.


NRI may, without limit, purchase on non-repatriation basis:
Government dated securities/Treasury bills
Units of domestic mutual funds
Units of Money Market Mutual Funds
National Plan/Savings Certificates Non-convertible debentures of a company
incorporated in India
Shares and convertible debentures of Indian companies through stock exchange
under Portfolio Investment Scheme, subject to the terms and conditions specified
in Schedules 3 and 4 to the FEMA Notification No. 20/2000- RB dated May 3,
2000, as amended from time to time.
Exchange traded derivative contracts approved by the SEBI, from time to time, out
of INR funds held in India on non-repatriable basis, subject to the limits prescribed
by the SEBI.

37

Note: NRIs are not permitted to invest in small savings or Public Provident Fund
(PPF).
B. Investment in immovable Property
NRI/PIO4/Foreign National who is a person resident in India (citizen of Pakistan,
Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior
approval of the Reserve Bank) may acquire immovable property in India other than
agricultural land/ plantation property or a farm house out of repatriable and/or non-
repatriable funds.
The payment of purchase price, if any, should be made out of
(i) funds received in India through normal banking channels by way of inward
remittance from any place outside India or
(ii) funds held in any non-resident account maintained in accordance with the provisions
of the Act and the regulations made by the Reserve Bank.
Note: No payment of purchase price for acquisition of immovable property shall be
made either by travellers cheque or by foreign currency notes or by other mode other
than those specifically permitted as above.
NRI may acquire any immovable property in India other than agricultural land/farm
house plantation property, by way of gift from a person resident in India or from a
person resident outside India who is a citizen of India or from a person of Indian
origin resident outside India
NRI may acquire any immovable property in India by way of inheritance from a
person resident outside India who had acquired such property in accordance with
the provisions of the foreign exchange law in force at the time of acquisition by him
or the provisions of these Regulations or from a person resident in India
An NRI may transfer any immovable property in India to a person resident in India.
NRI may transfer any immovable property other than agricultural or plantation
property or farm house to a person resident outside India who is a citizen of India
or to a person of Indian origin resident outside India.
In respect of such investments, NRIs are eligible to repatriate:
38

The sale proceeds of immovable property in India if the property was acquired out
of foreign exchange sources i.e. remitted through normal banking channels/by
debit to NRE/FCNR (B) account.
The amount to be repatriated should notexceed the amount paid for the property in
foreign exchange received through normal banking channel or by debit to NRE
account (foreign currency equivalent, as on the date of payment) or debit to FCNR
(B) account.
In the event of sale of immovable property, other than agricultural land/farm
house/plantation property in India, by NRI/PIO, the repatriation of sale proceeds is
restricted to not more than two residential properties subject to certain conditions.
If the property was acquired out of Rupee sources, NRI or PIO may remit an
amount up to USD one million per financial year out of the balances held in the
NRO account (inclusive of sale proceeds of assets acquired by way of inheritance
or settlement), for all the bonafide purposes to the satisfaction of the Authorized
Dealer bank and subject to tax compliance
Refund of (a) application/earnest money/purchase consideration made by house-
building agencies/seller on account of non-allotment of flats/plots and (b)
cancellation of booking/deals for purchase of residential/commercial properties,
together with interest, net of taxes, provided original payment is made out of
NRE/FCNR (B) account/inward remittances.

Repayment of Housing Loan of NRI/PIOs by close relatives of the borrower in India
Housing Loan in rupees availed of by NRIs/ PIOs from ADs/Housing Financial
Institutions in India, can be repaid by the close relatives in India of the borrower.
C. Facilities to returning NRIs/PIO
Returning NRIs/PIO may continue to hold, own, transfer or invest in foreign
currency, foreign security or any immovable property situated outside India, if such
currency, security or property was acquired, held or owned when resident outside
India
Foreign Currency Account
39

A person resident in India who has gone abroad for studies or who is on a visit to a
foreign country may open, hold and maintain a Foreign Currency Account with a
bank outside India during his stay outside India, provided that on his return to
India, the balance in the account is repatriated to India. However, short visits to
India by the student who has gone abroad for studies, before completion of his
studies, shall not be treated as his return to India.
A person resident in India who has gone out of India to participate in an
exhibition/trade fair outside India may open, hold and maintain a Foreign Currency
Account with a bank outside India for crediting the sale proceeds of goods on
display in the exhibition/trade fair. However, the balance in the account is
repatriated to India through normal banking channels within a period of one month
from the date of closure of the exhibition/trade fair.
Resident Foreign Currency Account
Returning NRIs /PIOs may open, hold and maintain with an authorised dealer in
India a Resident Foreign Currency (RFC) Account to transfer balances held in
NRE/FCNR(B) accounts.
Proceeds of assets held outside India at the time of return, can be credited to RFC
account.
The funds in RFC accounts are free from all restrictions regarding utilisation of
foreign currency balances including any restriction on investment in any form
outside India.
RFC accounts can be maintained in the form of current or savings or term deposit
accounts, where the account holder is an individual and in the form of current or
term deposits in all other cases.
A Non Resident Indian (NRI) is a person resident outside India, who is a citizen of
India or is a person of Indian origin.
A Person of Indian Origin (PIO) for this purpose is defined in Regulation 2 of
FEMA Notification ibid as a citizen of any country other than Bangladesh or
Pakistan, if (a) he at any time held Indian passport; or (b) he or either of his
parents or any of his grandparents was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is
a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b)
Close relative means relative as defined in Section 6 of the Companies Act, 1956
40

A Person of Indian Origin means an individual (not being a citizen of Pakistan or
Bangladesh or Sir Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who
(i) at any time, held an Indian Passport or (ii) who or either of whose father or
mother or whose grandfather or grandmother was a citizen of India by virtue of the
Constitution of India or the Citizenship Act, 1955 (57 of 1955)
























41

CHAPTER 6
PAN CARD FOR NRIS

For all Indian citizens who are liable to pay tax under the income tax act
1961, or are required to enter into financial transactions in india, it is mandatory to have
a permanent account number.
The permanent account number (PAN) Is a combination of 10 alphanumeric
number issued by the income tax department. The department has entrusted uti
investor services ltd. ( UTIISL) with the task of managing it & PAN service centers
wherever the it department has an office in the country. The national securities
depository limited (NSDL) has also been engaged to allot pant cards from tin facilitation
centers.
Applying for a pan
From 49a,hich is the application form for a pan, can be downloaded from the income
tax, utiisl and nsdlwebsite:
www. Incometaxindia.gov.in & www.utiisl.co.intin.nsdl.com
the forms care also available at the it pan service centers and tin facilitation centers. A
tatkal or priority service has been provided for, to enable speedy allotment of the pan
card through the internet. The pan is allotted through e-mail on priority in 5 days as
against the normal 15 days to applicant upon online payment through a credit card. The
pan has lifetime validity.
The necessity for pan card to NRIs
Apart from income returns which must carry the pan, it is mandatory to submit the pan
in all financial transactions, like the purchase and sale property in india, payments for
purchase of vehicles, foreign visits, securing telephone connection or making time
deposits in a bank worth over Rs.50,000.
For NRIs, pan is necessary to conduct monetary transaction in india, invest in stocks,
and pay tax on their Indian income.
The application for pan must be accompanied by:
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A recent colored photograph of size 3.5 cms * 2.5 cms on the application form
A proof of residence and identify ( attested school leaving / matriculation
certificate / degree / credit card / voter identity / ration / passport / driving licence
/ telephone / electricity bill / employer certificate.
Code of the concerned assessing officer of the it department obtainable from the
it office where form is submitted.

DEMAT ACCOUNT
A demat account facilities buying and selling shares, precluding cumbersome
paperwork and meaningless delays.
Advantages of demat account:
It is safe, secure and convenient mode of transacting in shares.
Minimum brokerage charges.
Ensures immediate liquidity
Removes uncertainty on ownership title of securities
Allows quick allotment of public issues
Enables smooth process in pledging shares
Avoids delays due to wrong / incorrect signatures, post, and misplacement of
certificates
Prevents risks like forgery and counterfeit, theft or damage to document
Saves on stamp duty , paperwork on transfer deeds
Gives immediate benefits from bonus shares and stoc splits
Who offers Demat facility?
Depository participants or Dps offer demat account sevices , which would include
banks, hokling a demant account with a bank enables quick on- line dealings ensuring
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credit of a transaction t the account holders saving account by the third day. Banks
have an added advantages over other dps with their large network of branches.

How to open a demat account in india
Fill up the demat account opening form at the nearest depositary participant
You may refer to either
Joint demat accounts can be opened, retaining the same order of names
Separate demat accounts have to be opened for different combinations of
names in the cse of three or more joint holers.
Any number of demat accounts and dps are permitted
A multiple sign demat is feasible, operated several holders
Dps charge a fee for switching shares from electronic to physical form and vice
versa, which varies from a flat fee to a variable fee. Remat and demat charges
may also show a discrepancy between dps.
Some dps offer a discount o frequent traders.
It is advisable to maintain all demat accounts with the same dp to keep track of
capital gains liabilities, different dps follow dissimilar methods of computing the
capital gains , which is determined by the period of holding.
The charges on a demat account vary between dps. Broadly, they are: account
opening fee, an annual folio maintenance charge paid in advance, a monthly
custodian fee, and a charge on
transactions, which may either be charged every month or as a flat fee per
transaction, and its nature. Some dps may skip the account opening fee but
charge a re opening fee for the account. Account holders are also subject o a
service tax.
No opening balance is required for a demat account.

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NRI DEMAT ACCOUNTS:
NRIs need to fill in NRI in the type and repatriable or non-repatriable in the sub-
type on the form. No special permission from the RBI is required by nris to open a
demat account, through specific cases may require authorization from the designated
authorized dealers.
NRIs require separate demat account for securities under the foreign direct investment
(FDI) schme, which is repatriable, and the portfolio investment scheme and scheme for
investment which can be either repatriable or non-repatriable. Repatriable and non-
repatriable securities cannot be held in a single demat account.
Resident Indians can continue to hold non-repatriable demat accounts they hold even
after they acquire non-resident Indian status. However, when a nri returns to india
permanently , he must inform his designated authorized dealer of his new status, and a
fresh account would have to be opened. The securities held in the nri demat account
would have to be transferred to the new resident demat account, and the NRI demat
account closed. The demat account would have to be linked with the NRIs NRO
account for non-repatriable accounts and nre accounts for repatriable accounts t credits
dividends and interests.














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CONCLUSION

Nri banking today stands as one of the most profitable business for
banks, with india having one of the largest NRI populations and a very
prosperous one too, NRI banking is one hot business no bank can afford to
ignore today, india needs foreign exchange reserve for its developing
economy.

Realizing this, banks are shaping up their in order to attract this NRI
money. Further with india pushing for capital account convertibility, and the
success of pravsi bharatiya diwas, prospects for NRI banking has never
been so good than today.