For Non- resident Indians (NRIs), non-resident rupee account is emerging as an attractive investment option as globally the interest rates continue to remain low. According to NRIs, the NRE account offers higher interest rates and they are tax-free too.
According to experts, NREs will continue to attract higher inflows as compared to other bank accounts such as foreign non-resident account or foreign currency non-resident (FCNR) and non-resident ordinary accounts (NRO).
Most of the central banks have decided to keep interest rates low with an expectation to kickstart economic growth.
Mr. A Surendran, head of international banking, Federal Bank said, "People have been transferring funds from NRO to NRE accounts because NRE accounts are tax free and repatriable. In NRO account, interest income is taxed at source".
Similarly, this was the case with FCNR (B) also. Mr. N S Venkatesh, Chief General Manger and head of treasury, IDBI Bank said, "There were instances of conversions happening from FCNR (B) to NRE account due to higher interest rates offered in NRE deposits. People were willing to take currency risks, as the rupee had depreciated. So they converted it into a rupee deposits earning a higher interest rate".
RBI had deregulated interest rates on NRE and NRO in December, 2011 to provide greater flexibility to banks in mobilizing non-resident deposits.