The Regulations Governing Non-resident Accounts

Ordinary Non-Resident Accounti Rupee accounts other than blocked accounts and accounts under special schemes like Non-resident (External) Accounts maintained with authorised dealers by persons, firms, companies and other organisations resident outside India are referred to as ordinary non-resident accounts (NRO accounts). Funds in an ordinary non-resident account are not repatriable abroad without the permission of Reserve Bank.

No concession is shown in taxation; the funds are not eligible for benefits like priority allotment, etc. Income tax is deductible at source. One advantage of ordinary non-resident accounts is that certain local funds accruing to the account holder are allowed to be credited to the account which facility is not available for other accounts.

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1. Opening of Account. Account can be opened in the names of non-resident individuals/entities without approval of Reserve Bank for the purpose of putting through bonafide transactions in rupees not involving any violation of the provisions of FERA and exchange control regulations. Prior to the opening of the account, the bank should obtain an undertaking that the account holder shall not make available to any person resident in India foreign currency against reimbursement in rupees or in any other manner in India.

The account holders should also give an undertaking that in case of debits to the accounts for purposes of investment in India and credits representing sale proceeds of investments, they would ensure that such investments/disinvestments would be covered either by the general or special permission of Reserve Bank. Once this undertaking has been obtained, the bank need not verify the particulars of approvals obtained while permitting individual credits/debits to the account.

2. Joint Account. Accounts of non-residents may be jointly with residents.

3. Type of Accounts. Accounts may be maintained in the nature of current, savings or fixed deposit accounts. Rules applicable to resident accounts apply to NRO accounts.

4. Operations. Credits permitted in the accounts are:

(a) Proceeds of remittances received in any permitted currency from abroad through normal banking channel, or any permitted currency tendered by the account holder during his temporary visit to India or transfers from rupee accounts of non-resident banks situated in the External Group of countries.

(b) Legitimate dues in rupees of the account holder in India. Debits for all local payments in rupees are permitted.

5. Repatriation. Balances in accounts are not normally eligible for remittance abroad without the approval of Reserve Bank. Funds derived by remittances from abroad and which have not lost their identity as remittable funds will only be considered for remittance abroad.

6. Form A-4. Form A-4 should be completed in respect of transactions (other than interest canted on the account and other deposits) for Rs. 10,000 and above and retained by the bank. As far as possible the form should be got completed by the resident party or by the bank itself by getting the particulars from the resident beneficiary or the remitter.

7. Loans/Overdrafts. Loans or overdrafts to non- resident account holders may be granted on the security of fixed deposit held by them subject to usual norm as applicable to resident accounts.

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