NRI Transition Services – A Comprehensive Guide To Banking And Financial Managem

1. NRI Transition Services – A Comprehensive Guide To Banking And Financial Management Relocating abroad or returning to India comes with a set of financial, legal, and compliance challenges. Among these, banking and investment management forms the foundation of a smooth transition. Understanding the types of accounts, regulatory requirements, and proper selection of banks is crucial for NRIs to manage their finances efficiently. This blog provides a detailed overview of NRI banking services, change of residential status, account management, and loans against NRI deposits, which form the core of NRI transitions services in India. Importance of a bank for NRIs Bank accounts are the first thing any NRI/PIO/OCI/FPI would need for investing in India. While investment can be made through inward remittances directly, a bank account makes the investment process easy, convenient and simple. RBI has authorized banks to deal in foreign exchange and foreign securities as an Authorized Dealer (AD). While RBI issues directions, the actual work is being carried out by the bank and reported to RBI. Different banks may have different document requirements and/or procedures based on their internal structure and policies. Also, the permitted activities of an

2. AD also differ based on various categories. Thus, two branches of the same bank having different AD categories would have different capacity, knowledge and experience of dealing in foreign exchange or NRI matters. As a result, it is critically important for NRIs to select the right bank and the right bank branch. While it is easy to open an account with another bank; generally, once a bank has been selected, it would be very difficult to change a bank or close an account. Selecting the right bank In todays’ highly competitive world, all the leading banks would provide almost the same features and services. However, every bank may have some unique features. For example, one bank may allow online opening of an account, while another may process transactions online or via email. One bank may give a higher interest on the savings account, while another bank may offer other products. In contrast, a bank may require the client’s physical presence for opening a bank account or another bank may require physical documents for processing transactions for security purposes. The determining factor here should be the strength of the bank’s NRI department, tenure, knowledge and experience of persons handling NRI matters, and their ability to know, understand and apply the RBI rules in the most customer centric way while complying with all applicable rules and regulations. It is the bank which is actually doing all the work including account opening, converting foreign exchange, allowing credits, processing payments, making investments, ensuring compliance with RBI, remitting funds or transferring from NRO to NRE, making selection of a bank and bank branch is very important for an NRI’s investment journey. Bank Accounts for NRIs A person resident outside India (PROI), widely known as non-resident under FEMA usually maintains one of the following three accounts with the banks in India: NRO (Non Resident Ordinary) Account NRE (Non Resident External) Account FCNR (Foreign Currency Non Resident) Account A resident would generally maintain one of the following three accounts in foreign currency: RFC (Resident Foreign Currency) Account

3. EEFC (Exchange Earners Foreign Currency) Account RFCD (Resident Foreign Currency Deposit) Account Basic information related to bank accounts Only Non-Resident Indians (NRIs) and Person of Indian Origins (PIOs), including Overseas Citizen of India (OCIs) can open NRO, NRE and FCNR accounts. Any person resident outside India (foreign national of non- Indian origin) can open an NRO account only. An NRO account is not allowed for residents of Nepal and Bhutan. Persons of Bangladesh and Pakistan require prior approval of RBI for opening NRO, NRE or FCNR accounts. Foreign nationals, including PIOs and OCIs that are living in India are considered as Residents under FEMA and are not allowed to open an NRO, NRE or FCNR accounts. They can only open a resident rupee account. Nomination facility is available to the holders of NRO, NRE and FCNR accounts. Funds transferred from NRE or FCNR accounts to NRO or resident accounts would lose repatriability. Banks are not allowed to give any additional interest rate benefits on any type of deposits of non-residents. Thus, NRIs cannot get the additional interest available to senior-citizens (up to 1%) or bank employees (1%). Change of residential status When there is a change in residential status, the bank needs to be notified and type of account needs to be updated accordingly. When a Person Resident In India becomes a Person Resident Outside India (NRI or PIO or OCI), the normal resident account needs to be re- designated as NRO savings account and vice versa. And, now, the person would be eligible to open NRE and FCNR accounts. When the person becomes resident in India from non-resident, the NRE account is to be closed and funds in the NRE account is to be transferred to the resident savings account or to the Resident Foreign Currency (RFC) account at the option of the account holder. FCNR deposit account is allowed to be maintained until maturity, however, on maturity, the FCNR deposit cannot be renewed and the funds in the FCNR deposit account is to be transferred to the Resident Foreign

4. Currency (RFC) account or to the resident savings account at the option of the account holder. This process forms a critical component of NRI transitions services in India, ensuring compliance with FEMA and RBI regulations while safeguarding the client’s financial interests. Premature withdrawal of deposits NRO, NRE or FCNR deposits can be withdrawn prematurely. Banks are allowed to levy any penalty at their discretion. In the case of premature withdrawal of FCNR deposits, banks are also allowed to levy a penalty to recover the swap cost. However, the penalty provisions should be clearly disclosed to the depositor at the time of acceptance of the deposits. Many banks may not charge any penalty for premature withdrawal after 1 year. If there is no premature penalty, the interest rate applied on the pre- matured deposit would be the lower of the interest rate of the deposit or the interest rate of the deposit for the term pre-matured deposit kept at the time of initial deposit. For example, if Mr. Chandrakant Desai, from Hong Kong invested Rs. 10,000,000 in an NRE bank deposit in April 2025 for 5 years at 9%. However, he prematurely withdraws the deposit after 12 months in May 2026. In April 2025, the interest rate on 1 year deposit was 8%. If the bank does not charge any premature penalty, he would get interest @ 8%, lower of the interest rate on the deposit of 9% or interest rate on the tenure for which the deposit is kept (1 year) at the time of the initial deposit (April 2025) of 8%. If bank charges 1% penalty, he would get interest of 7%. Loans against security of accounts RBI allows loans and overdraft facility against the balances in the NRE, NRO or FCNR accounts to the account holders or to the third party. The loan amount is to be utilized for meeting the borrower’s or third party’s personal requirements and/or for business purposes. The borrowed money cannot be used for carrying on agricultural or plantation activities, investment in real estate business or re-lending. All the rules and regulations of RBI related to margin, rate of interest, etc. are required to be complied with.

5. Loans can be made in foreign currency against NRE or FCNR deposit accounts and the funds are also allowed to be utilized outside India by the account holder or by the third party at the request of the depositor for bona fide purposes. Banking forms the cornerstone of ExpertNRI’s NRI transitions services in India, helping NRIs, PIOs, and OCIs manage their finances while complying with RBI and FEMA regulations. From selecting the right bank and account type to managing change of residential status, premature withdrawals, and loans against deposits, proper guidance ensures a smooth and efficient transition. A well-structured approach to NRI banking is not just about compliance; it is about making investments, managing assets, and securing financial freedom in India while living abroad. Selecting the right bank and understanding account rules are critical steps in your NRI investment journey. With years of experience and a dedicated team of NRI financial experts, ExpertNRI provides personalized solutions tailored to each client’s unique needs. Their comprehensive approach ensures that every NRI can make informed decisions with confidence and ease. Read more article: NRI Transition Services – A Comprehensive Guide To Banking And Financial Management