NRI Banking in India

Non-Residential Indians (NRI’s) and Persons of Indian Origin (PIO) fall into a special category of individuals who’ve been designated certain privileges by the apex body of banking in India – The Reserve Bank of India. According to the Foreign Exchange Management Act (FEMA), 1999, a person resident outside India means a person who is not resident in India.

Accounts that can be maintained by NRI’s and PIO’s:

NRI’s and PIO’s can open bank accounts with institutions authorized to trade in foreign currency without the permission of the Reserve Bank of India. They can operate three different types of NRI Banking accounts, they are:

·         Non-Resident Ordinary Rupee Account (NRO Account)

·         Non-Resident (External) Rupee Account (NRE Account)

·         Foreign Currency Non Resident (Bank) Account – FCNR (B) Account

·         The NRO Savings accounts can also be maintained with Post Offices in India.

Non-Resident Ordinary Rupee Account (NRO Account):

This account is like any other account that can be opened by resident Indians. It can be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. The deposits though have to be in Rupees. NRI’s and PIO’s can open a joint account with resident Indians.  The two types of accounts that can be operated are:

·         Savings Account – This is no different than the usual savings account most people operate. You can credit legitimate dues /earnings / income such as dividends, interest etc., in this account with the bank free to determine the rate of interest.

·         Term Deposits – NRI’s can invest in a financial institution for a period of time. However, the interest rate can’t be higher than those offered by them on comparable domestic rupee deposits.

The NRO account is unique in that it allows the debit of income originating in India from sources like dividends or interest. As a result, these are not tax free per se and you have to pay the corresponding income, wealth and gift taxes. The other interesting thing to note is that there’s very limited scope of transferring the funds from India to overseas locations.

To open this account, you need to submit attested copies of your passport, visa, work permit along with appropriate proof of Indian or overseas address. Some countries have signed Double Tax Avoidance Agreement (DTAA) with India. In case you want to enjoy concessional tax rate, you will have to submit a Tax Residency Certificate (TRC), Permanent Account Number (PAN) card, and the original DTAA Annexure. Also, the minimum account balance that’s required is Rupees 10,000.

Non-Resident (External) Rupee Account (NRE Account):

This account may be in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney. The account has to be maintained in Indian Rupees. Like the NRO Account, you can operate a Savings Account or invest in Term Deposits, with the concerned financial institution free to determine interest rates. The four key points to note about this account are:

·         There is no provision to allow debit of income earned in India

·         It is not taxable

·         There are no limits on the amount of money that can be transferred to a foreign country

·         You can open this account with another NRO or PIO, but not a resident Indian

Most people who open this account are willing to park funds abroad in Indian rupees.  In the current climate though, this wouldn’t be the best of ideas. Exchange rate fluctuations leave you vulnerable to taking a huge hit and any depreciation the Rupee suffers will have an adverse impact on this fund.

Foreign Currency Non Resident (Bank) Account – FCNR (B) Account:

FCNR (B) accounts are only in the form of term deposits of 1 to 5 years. All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also. The great thing about this account is that it can be in any freely convertible currency most often in US$ or Pound Sterling. Apart from these three bank accounts, a non-resident Indian also has the option of jointly owning a regular bank account with a resident India, although without the power to operate it.

Source: http://kotaksecurities.blogspot.nl/2014/02/nri-banking-in-india-40018.html

The NRI dream home loans in India!

Owning a home is a dream for most of us and thanks to the diverse home loan schemes available to make that dream a reality. How is this different in case of Non- Resident Indians (NRI)? Is it equally easy for them to obtain a home loan and own the property of their choice? NRI home loans are now easily available in India, subject to fulfillment of certain conditions.

NRI Status:

When it comes to defining a NRI, all banks and financial institutions go by the definition specified by the Reserve Bank of India (RBI) i.e., “An Indian citizen who holds a valid Indian passport and stays abroad for employment or carrying out business or vocation under circumstances indicating an intention for an uncertain duration of stay abroad is an NRI.  So those eligible for home loans under this category would be those employed or carrying out business outside India, those posted abroad by the Indian government or companies or those Indians serving in international agencies like the IMF, UN, World Bank etc.

Properties eligible for loan:                                           

Home loans can be availed for any property ready for possession or under construction, construction of property on an owned plot or for alterations to the existing property. Buying of a plot also qualifies for a home loan.

Maximum amount of loan allowed and other conditions:

Income and educational qualifications play an important role in deciding the maximum amount of loan available to an NRI.  Banks allow an advance of 80-85% of the value of the property, subject to the Gross Monthly Income (GMI) of an individual. Maximum amount of loan granted, is in the range of 36-40 times GMI. Some banks also go by the ratio of Equated Monthly Instalment to Net Monthly Income (EMI/NMI).

For E.g.: State Bank of India puts a limit of 40% of NMI against EMI for NRIs with annual income up to Rs 2 L.  For those earning between Rs. 2-5 L, it is 50% of NMI; and for individuals earning more than Rs. 5 L annually, it is 55% of NMI.

Few other banks set different criteria depending on educational qualifications, place of residence etc. For E.g.: With ICICI Bank, for those residing in the Middle East, the minimum annual salary required is 36000 Dhms if the tenure is within 5 years and for tenures between 6-10 years the income requirement is set at 48000 Dhms. While for those residing in the USA and others the respective limits are 30000 USD and 42000 USD. The criteria differs for self-employed, depending on the educational qualifications.

It is important to note that only graduate NRIs can avail home loans in India.

Tenure of loans:

While a resident can avail loans with a maximum tenure of 30 years with some banks, tenure for NRI home loans is restricted. It is available within the range of 5-15 years. Extension beyond the term of 15 years is solely at the discretion of the bank and in exceptional cases only.

Rate of Interest:

There is a higher rate of interest charged on NRI home loans to cover the higher risk involved. There is generally a margin of 0.25% -0.50% charged.

Documents required:

The documentation required for NRI home loans is different from resident home loans. Documents normally required are copies of the passport, valid visa and work permit, contract of employment, work experience certificate, salary certificate and statements of NRENRO accounts. For those residing in the Middle East, copy of employment card is also required. Salary certificate should be attested from the embassy if the salary is not getting credited to a bank.

Submission of documents: You need not wait for your next trip to India to apply for a home loan. Many of the banks have branches in places like Dubai, Singapore, London etc. where you can apply for NRI home loans. Few banks like ICICI, HDFC and Axis also extend the facility of online submission and status updating.

However, you would require executing a General Power of Attorney in favour of a resident Indian who would act on your behalf with the bank. If POA is issuing while you are abroad, it needs to be signed in front of the embassy official.

Repayment of loan: The repayment of these loans can only be through Non-resident External (NRE) or Non-resident Ordinary (NRO) accounts with remittance from abroad. No other funds can be used for repayment of these loans. The repayment needs to be made in Indian Rupees only.

Change in status from NRI to Resident: When there is a change in status from NRI to resident the loan is reworked according to the revised income and interest applicable is charged and the tenure is also revised.

Source: https://blog.bankbazaar.com/the-nri-dream-home-in-india/