NRI accounts are maintained by banks which hold authorised dealers' licences from the Reserve Bank of India. Some cooperative and commercial banks have also been specifically permitted to maintain NRI accounts in rupees even though they are not authorised dealers. The financial budget for 2007-08 extends NRI accounts to regional rural banks (RRBs) as well. This would boost remittances from NRIs particularly in Bihar, Kerala, Uttar Pradesh and Gujarat where a large number of persons from rural areas from these states are employed overseas.
Banking Laws for NRIs allow for accounts with authorised dealers to be maintained in Indian rupees and in foreign currency.
The Foreign Exchange Management Act, 1999 determines the laws regulating foreign exchange and enlists the various deposit schemes available to Non-Resident Indians
The types of deposit schemes made available to NRIs are:
a) FCNR (B) - Foreign Currency (Non-Resident) Account (Banks) Scheme for all NRIs
b) NRE Account - Non- Resident (External) Rupee Account for all NRIs
c) NRO Account - Non-Resident Ordinary Rupee Account Scheme.
All NRIs can open such accounts, with the exception of individuals residing in Pakistan and Bangladesh, who require special permission from the RBI. Joint accounts of two or more non-residents and nomination facility are permitted.
While the FCNR(B) is a term deposit only, the NRE and NRO accounts can be operated as either savings, current, recurring or fixed deposit accounts. As for interest rates, FCNR(B) and NRE are subject to a cap, and should not exceed the LIBOR/SWAP rates. In the case of NRO accounts, rates are determined by the banks. The interest rates, currently at 3.5% apply to a period of 1 to 3 years.
The total NRE/ FCNR deposits during 2006-2007, as per RBI statistics, are USD 37,751 million and are expected to grow with regional rural banks also mopping up funds. Banks are expected to offer lucrative interest rates to bolster NRI funds.