NRIs are required to adhere to certain banking rules in India to comply with the Foreign Exchange Management Act (FEMA). Such rules control how NRIs hold, use, and conduct transactions in Indian bank accounts while residing overseas.
Major Banking Rules for NRIs
1. Regular Savings Accounts Are Not Allowed
- NRIs are not permitted to hold a regular resident savings account in India.
- Once one becomes an NRI, the current savings account has to be converted to an NRO (Non-Resident Ordinary) account.
- Not converting may attract penalties under FEMA.
2. Types of Bank Accounts for NRIs
- NRE (Non-Resident External) Account – For foreign income, tax-free, fully repatriable.
- NRO (Non-Resident Ordinary) Account – For income received in India, taxable, restricted repatriation.
- FCNR (Foreign Currency Non-Resident) Account – Foreign currency fixed deposit, tax-free, fully repatriable.