The term NRI (Non-Residential Indians), refers to a section of people having Indian origin but residing outside India. NRI Banking is done to attract NRI’s to carry out financial transactions, like depositing amounts and other remittance into India through banking channels. NRI Banking was introduced by the Government of India in 1970, to bolster the balance of payments between Indian banks and NRI’s through Non-Resident (External) Account Rules which are governed by the Exchange Control Regulations. Funds held in these kinds of accounts enjoy certain provisions like tax-exemptions, free repatriation facilities, etc.
NRI Banking in India is maintained by banks that hold official authorized dealers license from the reserve Bank of India. The financial budget for 2007-08 extends
nri term deposits accounts to regional rural banks (RRBs) as well. This would boost the economical growth in areas like Bihar, Kerela and Central India where the financial regulation as of now has been stagnant.
NRI-Banking facilitates the NRI customer to open the following types of accounts: 1) NRE (Non-Residential External) Account, 2) NRO (Non-Residential Ordinary) Account and 3) FCNR
(Foreign Currency non-residential bank) Accounts. All NRI’s are permitted by the RBI to open all these accounts except for people residing in Pakistan or Bangladesh, as they would need special permission. Joint accounts of two or more non-residents and nomination facility are permitted. The NRE account is opened in the form of Savings, Current or fixed deposits in Indian rupees. The funds in this account are fully repatriable. NRO accounts can be opened in the same manner as an NRE account, the only difference the funds here are not repatriable. FCNR accounts can be opened using a US, European and Japanese currency. The funds in this account are also repatriable.
NRI money transfer and NRO deposits follow a modular structure. These various modules render Banking solutions in a seamlessly integrated fashion. The Masters module permits maximum parameterization to be done, enabling the end user to make all changes with regard to Interest Rates or with regard to any changes as per directives from Head Office / RBI. Inventory, Currency, Country, Exchange rate and return reason details are also maintained. Scheduling of charges is also important. Most global banks having their bases set up in India offers products and services that tailor to the need of a wide range of customers. Hence the charges that need to be incorporated for these transactions should be fixed after through analysis. These charges mostly depend on the magnitude of transaction taking place. Other major facilities include authorization and freezing of Accounts, account closure, pre-closure, Renewal & overdue renewal of Deposits and issuing of final Savings Bank Interest Calculations.
As for interest rates provided on the NRI accounts are concerned, FCNR (B) and NRE are subject to a cap, and should not exceed the SWAP rates. In the case of NRO accounts, rates are determined by the banks. The interest rates, currently at 3.5% apply to a period of 1 to 3 years. As per RBI statistics, total NRE/ FCNR deposits made during 2006-2007 amounts too USD 37,751 million. The figure however is estimated to grow with regional & co-operative banks offering lucrative offers to bolster the NRI funds.
