NRIs have a reason to cheer
By Neelima Shankar
Dec 21, 2010
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Lenders in India both from public as well as private sector have raised NRI deposit rates thus giving the non residents a reason to cheer. With foreign banks offering comparatively lower rates of interest on fixed deposits, NRIs are thinking of depositing their funds in India and thus see their money grow manifold.

There are different types of accounts which a NRI can open in India like non-resident (ordinary) account or NRO account, non-resident (external) rupee account or NRE account and non-resident (foreign currency) account or FCNR account.

NRO account however does not allow the depositor to repatriate or take back the funds outside India in terms of foreign exchange without permission from banking and monetary regulator, Reserve Bank of India.

This is however possible with NRE account. Interest income in this account is exempted from income tax. Credits to this account have to be in the form of foreign exchange from outside India.

A customer can open FCNR account in four currencies namely pound sterling, US dollar, Japanese yen and euro. Also the account can be set up only for fixed deposits having minimum maturity of one year and maximum of three years.

"Parking money in NRI deposits depends on a lot of factors, including where you live and where you expect to utilise these funds. Given that interest rates in western Europe and the US are at historically low levels, deposits in India can give a higher return than leaving money in a bank in Europe or the US. However, one needs to be aware that by leaving money in rupees, one could be exposing oneself to adverse currency movements if the foreign exchange rates fluctuate and the NRI seeks to take the money out," said Kartik Verma of iTrust Financial Advisors.


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