Friday, December 18, 2015

Non-Resident Ordinary Rupee (NRO) Account

Non-Resident Indian (NRI)
An NRI means a person resident outside India who is a citizen of India or is a person of Indian origin.

Person of Indian Origin (PIO)
PIO is a citizen of any country other than Bangladesh or Pakistan, if
(a)he at any time held Indian passport; or
(b)he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act; or
(c)the person is a spouse of an Indian citizen or a person referred to in (a) or (b).

(a) Any person resident outside India, may open and maintain NRO account with an Authorised Dealer or an Authorised Bank for bona fide transactions in Indian Rupees.
(b)  Opening of accounts by individuals and entities of Pakistan and entities of Bangladesh requires prior approval of the RBI.
(c)  Opening of accounts by individual of Bangladesh may be allowed, subject to his holding a valid visa and valid residential permit.

Types of Accounts
Current, savings, recurring or fixed deposit. The Rate of interest and guidelines shall be in accordance with directives issued by RBI.

Joint Accounts with Residents / Non- Residents
The accounts may be held jointly with residents and non-residents.

Permissible Credits / Debits

A. Credits
(i)Remittances from abroad through normal banking channels in permitted currencies.

(ii)           Freely convertible foreign currency, tendered by the account holder during his temporary visit. Cash exceeding USD 5000 or its equivalent should be supported by currency declaration form. Rupee funds should be supported by encashment certificate, if they represent foreign exchange.

(iii)         Transfers from rupee accounts of non-resident banks.

(iv)         Legitimate dues in India. This includes income like rent, dividend, pension, interest, etc.

(v) Sale proceeds of assets acquired out of rupee or foreign currency funds or through legacy or inheritance.

(vi)         Resident individual can make a rupee gift to the NRO account of an NRI/PIO who is a close relative subject to the amount being within the overall limit prescribed under the Liberalised Remittance Scheme available for a resident individual.

(vii)       Resident individual may lend to a NRI/PIO close relative, subject to the amount being within the overall limit prescribed under the Liberalised Remittance Scheme available for a resident individual;

B. Debits

(i) All local payments in rupees including payments for investments in India.

(ii)           Remittance of current income like rent, dividend, pension, interest, etc. outside India.

(iii)         Remittance up to USD one million, per financial year (April- March).

(iv)         Transfer to his NRE account within the overall ceiling of USD one million per financial year.

Remittance of Assets

A citizen of a foreign state, not being a citizen of Nepal or Bhutan or a Person of Indian Origin (PIO), who –

(i)has retired from an employment in India, or
(ii)           has inherited assets; or
(iii)         is a widow resident outside India and has inherited assets of her deceased husband who was an Indian citizen resident in India,

may remit an amount, not exceeding USD one million per financial year, on production of documentary evidence in support of his ownership.

Foreign nationals of non-Indian origin on a visit to India

NRO account can be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India. The balance may be converted into foreign currency and paid to him at the time of his departure from India. The account should not be more than six months old and there should be not credit of local funds, other than interest accrued.
For accounts more than six months old, applications has to be made by the account holder to RBI.

Grant of loans / overdrafts by the Authorised Bank to account holders and third parties

(a) Loans to non-resident account holders and third parties may be granted in Rupees against the security of fixed deposits subject to the following conditions:

(i) The loan shall be only for borrower's personal and business needs and not for agricultural or real estate activities or for re-lending.

(ii)           Regulations relating to margin and rate of interest shall be complied with.

(iii) The usual norms as applicable in the case of advances to trade/industry shall be applicable for such facilities granted to third parties.

(b) Authorised Dealer may permit overdraft subject to their commercial judgement and other directives.

Change of residential status of account holder

(a) From Resident to Non-resident

(i)When a resident leaves India for a country (other than Nepal or Bhutan) for taking up employment, business, vocation or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as a Non- Resident (Ordinary) Account.

(ii)           Foreign nationals who become residents and are eligible to hold a resident savings bank account are permitted to re-designate their resident account as NRO account on leaving the country to enable them to receive their legitimate dues.

(b) From Non- resident to Resident

NRO accounts may be re-designated as resident Rupee accounts on return to India for taking up employment, business, vocation or for any other purpose indicating his intention to stay in India for an uncertain period. Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such visit.

Treatment of loans /overdrafts in the event of change in the residential status of the borrower

Where a person has availed a loan while residing in India and subsequently becomes a non resident, the Authorised Dealer may allow continuance of the facilities at their discretion. In such cases, repayment may be made by inward remittance or out of his resources in India.

Payment of funds to Non-resident nominee

The amount payable to a non-resident nominee of a NRO account shall be credited to the NRO account of the nominee with an Authorised dealer in India.

Operation of NRO account by Power of Attorney holder

Authorized Dealers may allow operations in an NRO account by a Power of Attorney holder provided such operations are restricted to:
(i)  All local payments in Rupees including payments for eligible investments; and
(ii) Remittance of the NRI’s current income in india after taxes, outside India.
(iii)  The resident Power of Attorney holder is not permitted to
·       repatriate funds other than to the non-resident himself
·       make payment by way of gift to a resident
·       transfer funds to another NRO account.

International Credit Cards

Authorised Dealer banks have been permitted to issue International Credit Cards to NRIs/PIO, without prior approval of Reserve Bank. Such transactions may be settled by inward remittance or out of balances held in the cardholder’s FCNR (B) / NRE / NRO Accounts.


The remittances (net of applicable taxes) will be allowed on production of requisite information in prescribed formats. It shall be mandatory on the part of Authorised Dealers to comply with the requirement of tax laws.

System of quarterly reporting of opening of NRO accounts by individual/s of Bangladesh:

i.  The Authorised bank should put in place a system of quarterly reporting whereby each branch shall maintain a record of the accounts opened by Bangladeshi nationals and details of such account shall be forwarded to their Head Office which shall report to the Under Secretary (Foreigners), Ministry of Home Affairs, on quarterly basis.

ii. The report shall contain Name, Date of arrival in India, Passport No. and Place/Country of issue, Residential permit reference and date and place of issue, Name of the FRO/ FRRO concerned and the Complete address and contact number of the branch where the bank account is being maintained.

Based on RBI Master Circular dt 01/07/15. Please visit for any further clarification if required…..     Poppy