Facilities to NRIs and Advances to Non-Residents against Non-Resident Deposits

Facilities to NRIs and Advances to Non-Residents against Non-Resident Deposits

I. Introduction to NRIs and Non-Resident Deposits:

  • Non-Resident Indians (NRIs) are individuals of Indian origin living abroad.
  • Non-Resident Deposits (NRDs) refer to deposits made by NRIs in Indian banks.

II. Facilities to NRIs:

  1. NRI Bank Accounts:
    • NRIs can hold various types of accounts: NRE (Non-Resident External) Account, NRO (Non-Resident Ordinary) Account, FCNR (Foreign Currency Non-Resident) Account.
    • NRE Account: Fully repatriable account, funds held in foreign currency, suitable for parking foreign income.
    • NRO Account: Non-repatriable account, suitable for managing Indian income, subject to taxation.
    • FCNR Account: Holds foreign currency, fixed deposit, fully repatriable, minimizes exchange rate risk.
  2. Repatriation:
    • NRIs can freely repatriate both principal and interest from NRE and FCNR accounts.
    • Repatriation from NRO accounts is subject to certain conditions and documentation.
  3. Investments:
    • NRIs can invest in Indian securities, mutual funds, and real estate under certain conditions.
    • Investment in government securities and certain corporate bonds is allowed.
  4. Loans and Advances:
    • NRIs can avail loans for purchasing property, education, personal needs, etc.
    • Loan eligibility based on income, repayment capacity, and property value.

III. Advances to Non-Residents against Non-Resident Deposits:

  1. Overdraft Facility:
    • Banks offer overdrafts against NRDs to meet short-term financial needs.
    • Interest is charged on the overdraft amount utilized.
  2. Loan against NRDs:
    • NRIs can avail loans against their NRDs for specific purposes.
    • Loan amount determined by the deposit’s value and repayment capacity.
  3. Features:
    • Interest rates vary based on the bank’s policies and market conditions.
    • Loan tenure, repayment options, and eligibility criteria differ among banks.

IV. Multiple Choice Questions (MCQs) with Answers:

  1. What does NRE stand for? a) Non-Resident Exchange b) Non-Repatriable External c) Non-Resident External (Correct) d) Non-Recourse Entity
  2. Which account allows fully repatriable foreign funds? a) NRO Account b) FCNR Account c) NRE Account (Correct) d) PIO Account
  3. NRIs can invest in which of the following? a) Real Estate only b) Indian Mutual Funds only c) Indian Securities, Mutual Funds, and Real Estate (Correct) d) Foreign Stocks only
  4. What is an overdraft facility against NRDs? a) A loan against property b) Repatriation of funds c) Short-term loan using NRDs as collateral (Correct) d) Conversion of NRDs into NREs

Note: This information is based on the knowledge available up to September 2021. Banking and financial regulations may change over time, so it’s essential to consult the latest official sources or financial experts for the most up-to-date information.