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

 

1.       Non-Resident (External) Rupee Account (NRE Account)

  • NRE 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.
  • Account will be maintained in Indian Rupees.
  • Account can be opened  with resident join holder – subject to terms and conditions
  • Balances held in the NRE account are freely repatriable.
  • Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively.
  • Authorised dealers/authorised banks may at their discretion/commercial judgement allow for a period of not more than two weeks, overdrawing in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/repaid within a period of two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE/FCNR accounts.
  • Savings - The interest rates on NRE Savings deposits shall be at the rate applicable to domestic savings deposits. Currently the interest rate above >= 4 % (varies from banks to bank)
  • Term deposits – Banks are free to fix the term deposit interest rates.  On 16th Decemer,2011 with a view to providing greater flexibility to banks in mobilizing non-resident deposits and also in view of the prevailing market conditions, RBI has  decided to deregulate interest rates on Non-Resident (External) Rupee (NRE) Deposits and Ordinary Non-Resident (NRO) Accounts (the interest rates on term deposits under Ordinary Non-Resident (NRO) Accounts are already deregulated). Accordingly, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under Non-Resident (External) Rupee (NRE) Deposit accounts and savings deposits under Ordinary Non-Resident (NRO) Accounts with immediate effect. However, interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.   Now banks are competing each other to attract NRE deposits and offering annual interest in the range of  6.50 to 9.50%., earlier is was 3.25%.  RBI direction is applicable for all Commercial and Scheduled Banks, Foreign Banks and Regional Rural Banks functioning in India with the license of RBI
  • The interest rates offered is almost at par with resident fixed deposits
  • Permissible credits to NRE account are inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers' cheques, issued against encashment of foreign currency, where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-I / Category-II, transfers from other NRE / FCNR accounts, interest accruing on the funds held in such accounts, interest on Government securities/dividends on units of mutual funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of refunds, etc.
  • Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligible to open such accounts, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc.
  • Loans up to Rs.100 lakh can be extended against security of funds held in NRE Account either to the depositors or third parties.
  • Such accounts can be operated through power of attorney in favour of residents for limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself. 
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