Banking is one of the most governing segments of the fiscal zone. Banking refers to the act of storing money for savings, issuing loans and credit, checking accounts or for exchange. It simply is the transactions done between an individual and a bank. Banks provide various facilities for an individual. Some of the prominent ones are creation of bank accounts to store money, credit creation, issuing of loans, investments in policies and liquid assets, issuing credit and debit cards etc. In the Indian financial sector, in the field of banking, another facility has been included which caters to the specific needs of the Non Resident Indians or NRI’s. With quite a few Indian citizens moving up and migrating to different parts of the world it became necessary to formulate rules and regulations for the control of their bank accounts. The banks could not lose out on customers just because they were moving out of the country. Facilities were set up to facilitate their accounts through the Indian banks. The government of India set up the Non Resident Account Rules that were governed by the Exchange Control Regulations.

In order to maintain Non Resident Indian Accounts the concerned banks need to require an authorised dealer’s license from the RBI i.e. Reserve bank of India. These licensed banks maintain the accounts for the NRI citizens and help facilitate their returns. The government has extend the Non Resident Indian Accounts to Regional Rural Banks or RRB’s too since a lot of the people from rural areas of states like Bihar, Kerala, Jharkhand etc. work overseas. NRI accounts have the authority to allow accounts to be maintained in both Indian Rupees (INR) and in foreign currency, by authorised dealers.  Based on the laws regulated by the Foreign Exchange Management ACT, 1999 regarding the foreign exchange, NRI’s are enlisted to three types of deposit schemes.

Foreign Currency Non Resident Account Scheme (FCNR)

Non Resident (EXTERNAL) Rupee Account

Non Resident (ORDINARY) Rupee Account

NRI’s can invest in any of the following schemes according to their best suitability.

They can even open joint accounts with other non-residents.  FCNR is a term deposit while NRE and NRO accounts can be operated as savings, fixed, recurring and other types of deposits. Funds stored in NRE accounts can be forwarded abroad while those stored in NRO accounts can only be used for making local expenditures and cannot be dispatched to foreign accounts. Therefore all the funds that do not meet the requirements under the Exchange Controls Act need to be accredited to NRO accounts. The rates of interest for NRO are determined by the banks while for FCNR and NRO accounts they are subject to a cap. In order to boost the NRI Account creation banks offer rewarding facilities and privileges like excellent interest rates, VIP facilities during banking etc.