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Foreign Exchange Laws

The Foreign Exchange Management Act, 1999 determines the laws regulating foreign exchange and enlists the various deposit schemes available to Non-Resident Indians
The types of deposit schemes made available to NRIs are:

  • FCNR (B) - Foreign Currency (Non-Resident) Account (Banks) Scheme
  • NRE Account - Non - Resident (External) Rupee Account;
  • NRO Account - Non-Resident Ordinary Rupee Account Scheme. All NRIs can open such accounts, with the exception of individuals residing in Pakistan and Bangladesh, who require permission from the RBI. Joint accounts of two or more non-residents and nomination facility are permitted.

While the FCNR (B) is a term deposit only, the NRE and NRO accounts can be operated as a savings, current, recurring or fixed deposit account.

As for interest rates, FCNR (B) and NRE are subject to a cap, and should not exceed the LIBOR/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.

The accounts at dealers (banks) authorized by the RBI accept currencies in Pound Sterling, US Dollars, Euros and Japanese yen, and except for the NRO account, can be fully repatriated. From the NRO account, only the current income up to a maximum of USD 1 million per calendar year is allowed.

The Indian Government's aggressive strategy to channelise funds from NRIs has resulted in a 7-8 % increase in NRI deposits and the latest move by the central bank to hike the repo rate by 25 basis points will not restrain overseas Indians from remitting money to India.

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