Best Savings Accounts for NRIs and NRIs returning to India

This article will look at some of the best savings accounts for NRIs.

For NRIs and those returning to India, international banking solutions can offer the best savings accounts with favorable terms.

It continues our look at savings solutions after I looked at options in numerous countries.

This has included Marcus by Goldman Sachs , Emirates NBD, HSBC Term Deposit, Bank of China Smart Saver, Citibank’s Time Deposit Account and an expat-specific solution.

The article will look at the best options available to NRIs, although it remains our position to in an era of 0% interest rates, saving money in the bank doesn’t make sense, and taking a big currency risk makes no sense.

For any questions, or if you are looking to invest, you can contact me using  this form.

Introduction:

NRI – An ‘NRI’ or ‘Non-Resident Indian’ is a person, who is actually an Indian Citizen but has opted to live outside India. Some of the reasons for people to move out of India are employment, business, etc. 

• Any person who lives outside India for more than 184 days or lives in India for less than 181 days in the previous year will be considered as an NRI in the following year.

PIO – There is another category of people similar to NRIs known as ‘PIO (Person of Indian Origin)’. People who usually fall under this category can be a citizen of any foreign country except Pakistan, Afghanistan, Bangladesh, Iran, China, Bhutan, Nepal and Sri Lanka.

A person is considered as a PIO only if he/she will be able to qualify for any of the following criteria:

• He/she should have had held an Indian Passport at any time 

• He/she should have parents or grandparents or great grandparents, who were residents of India after 1935 or other territories that joined after 1935, except for the countries mentioned earlier.

• He/she should be a spouse of an Indian Resident or a PIO.

OCI Card Holder – After discussing NRIs and PIOs, we also have to consider knowing about another category of people known as ‘OCI Card Holders’ or ‘Overseas Citizen of India Card Holders’.

A person would be eligible to become an OCI Card Holder if they are under certain selected criteria, which is:

• A person, who is a citizen of a foreign country, but used a citizen of India during the time or at any time after the constitution has been formed.

• A person, who is a citizen of a foreign country, anyhow, was eligible to become the citizen of India during or after the constitution has been formed.

• A person who is a citizen of a foreign country, but belonged to a territory, which became a part of India after 15^th August 1947. Any person who is a child, grandchild, or great-grandchild of such a citizen also falls under the same category.

• (a) – A minor child of the above-mentioned categories.
  (b) – A minor child whose parents or one of the parents is a citizen of India
  (c) – A person of foreign origin, who is a spouse of an Indian Citizen
  (d) – A person of foreign origin, who is a spouse of OCI Card Holder.

Are PIOs and OCI Card Holders the same? – Until January 2015, both of the statuses used to be different but since 15^th January 2015, the scheme PIO card scheme was withdrawn by the govt of India and has been combined with the OCI Card scheme.

Therefore, all the PIO cards will now be treated as OCI cards. Existing PIO cardholders would get a special stamp on the existing PIO card, which states “lifelong validity” and “registration not required”. This makes them equal to the already existing OCI cardholders.

The existing PIO Card Holders were given time up to 30^th June 2017, in order to convert their PIO cards to OCI cards. 

“However, we will discuss PIOs and OCI Card Holders as two different sets of people in order to provide a better understanding.”

Accounts available for ‘NRIs’, ‘PIOs’ and ‘OCI Card Holders’ – There are two types of major account types available for the NRIs, PIOs and OCI Card Holders, which are ‘NRO Account’ and ‘NRE Account’. The NRE account strands for ‘Non-Resident External Account’ and the NRO account stands for ‘Non-Resident Ordinary Rupee Account’. 

Now, let us have a more detailed look at both these accounts individually and which account is suitable for Non-Resident people depending on their needs.

NRE Account – An NRE account is used by the people who wish to send the income earned overseas to India. This is an Indian Rupee denominated account and is available in the form of savings accounts, fixed deposits and recurring deposits.

With the help of an NRE account, the Non-Resident people gain access to high liquidity and benefits for investments made in India.

The interest and the principal amount in the NRE accounts is exempt from the taxes in India, determining it as the best option for making investments in financial instruments such as fixed deposits, stocks, etc.

The NRE account also provides support for dealing with the financial requirements of an individual back home such as family expenses, savings for retirement, etc.

The principal amount or the interest earned with the help of an NRE account can be easily repatriated into the NRI’s country of residence. Usually, NRE accounts can be opened as joint accounts along with another NRI.

The NRE accounts are subject to the fluctuations in the value of the Indian Rupee against a foreign currency and conversion loss.

How to open an NRE account – People who are NRIs, PIOs and OCI Card Holders are able to open an NRE account.

In order to open an NRE account, the documents required are:

1. Passport
2. Proof of Permanent Residency or a Valid Visa
3. Proof of address in India, if the address is different on passport
4. Proof of Address in the country of Residence
5. Photo IDs

After gathering the necessary documents, an individual is required to self-attest them and get them attested from the Indian Consulate or Overseas Bank or get them notarized by a foreign notary depending on the chosen bank’s requirements.

People who want to open an NRE account from overseas might also be able to do that. Moreover, they can be able to open the account online without having to approach the bank’s foreign branch or a branch located in India.

Some banks might even provide the advantage of gathering the required documents by sending representatives of the bank to the customer. Some banks even provide paperless services as well.

The procedure for opening an NRE account online is as follows:

1. First of all, the customer needs to fill an application online from the bank’s website. If provided with a tracking ID, the customer needs to note it down to track the application progress.

2. After that, the customer should know about the documents required. Print out the necessary docs and sign on them if required. In some cases, pasting a photo might also be required.

3. The procedure is of submitting an application online for an NRE account is complete. However, different banks have different types of procedures.
   
   For example, banks like HDFC have multiple collection boxes for the customer to submit the application, some other banks require the documents to be posted to their address, whereas banks like Kotak and Deutsche offer free doorstep pickup service.

The procedure for opening an NRE account in India is as follows:

1. A customer when visiting India can go to a branch of the bank that is chosen by them and open an account. The customers must make sure that they carry all the required documents.

NRO Account – The NRO account is the account used by the Non-Resident people to hold and manage their income earned from the sources in India. A few examples of such types of income are dividends, pension, rents, etc. 

With the help of an NRO account, an NRI is able to receive funds in both the Indian currency as well as foreign currency. 

NRO account can be opened jointly with Residents Indians or other NRIs. Anyhow, if a joint NRO account is to be opened along with a resident Indian, the resident person should be closely related.

There is even a possibility for an NRI to transfer money from an NRE account to an NRO account. The funds in an NRO account are repatriable but charges might be applicable for the process.

How to open an NRO account – NRO accounts are also available for the NRIs, PIOs and OCI Card Holders.

Documents required to open an NRO account are:

1. Proof of Identity
2. Proof of Address in the Individual’s country of residence
3. Proof of NRI status/PIO status/OCI Card Holder status.
4. Proof of Financial Transactions abroad
5. Photo IDs

The procedure for opening an NRO account:

1. People already having a resident bank account can change it to an NRO account, if not, they can be able to open a new NRO account.

2. Based on the Indian Tax Laws, in order to open an NRO account, a person needs to prove his/her non-residential status. 

3. If an NRI is changing their resident account into an NRO account, they would be required to fill a form, which has to be signed by them as well.

4. They would have to provide the necessary documents, which have been mentioned above.

5. For the proof of residence of the individual, a ‘student status’ or ‘employment details’ or ‘dependent visa’, or a ‘resident permit’ in the country of residence should suffice.

6. The proof of residence should also be attested by the Notary, Indian Embassy, or a branch of the Indian bank with an overseas branch.

7. For the proof of financial transactions abroad, a credit card statement within the last 6 months or a cheque from an overseas bank can be submitted.

8. After submitting all the necessary documents, the bank verifies them and upon successful verification, the existing savings or current FD account would be changed into an NRO account.

9. In case of a new NRO account, after the bank receives and verifies all the documents submitted along with the initial amount, a new NRO account will be opened.

Similarities between an NRE account and an NRO account – There are few similarities between the two types of accounts. They are:

• Individuals are able to make deposits and withdrawals in both the Indian currency as well as foreign currency.

• Fund transfer process is similar in both cases. Funds can be transferred from an NRE account to another NRE account, in the same way, transfers can be made from an NRO account to another NRO account.
  
  However, funds can be moved to an NRO account from an NRE account, whereas, NRIs can’t move funds to an NRE account from an NRO account.

• Both the accounts (NRE and NRO) are INR accounts and the average amount that needs to be maintained is the same for these two.

• Joint accounts are available for NRE as well as NRO accounts, under certain conditions. Availability for the NRI individuals to open as a Savings account or a Current account.

Differences between NRE account and NRO account – Having discussed the similarities, let us have a brief look at the differences between the NRE and NRO accounts.

• The funds in an NRE account can be easily repatriable but it is not the same for NRO accounts. In the case of NRO accounts, the remittance is only permitted up to USD 1 million including the taxes assessed within a financial year.
  
  Individuals are also required to take a formal pledge/undertaking along with a certificate obtained from a Chartered Accountant.

• An NRE account is free from taxes i.e., income tax, gift tax and wealth tax in India.
  
  The interest earned from NRO accounts and credit balances has an income tax applicable. Not only that, but they are also subject to wealth tax and gift tax. Anyway, a reduced tax benefit can be availed under the DTAA (Double Tax Avoidance Agreement).

• NRE joint account can be opened along with another NRI. NRO joint account can be opened along with a resident Indian (who is a close relative) or an NRI.

By keeping all the above-mentioned information in mind, NRE accounts are suitable for the people if:

• You are an individual looking to store overseas earnings remitted to India while converting it to Indian Rupees.

• You want to maintain liquidity while keeping the savings in Indian currency.

• You won’t require a joint account along with a resident Indian and would like to open one along with another NRI.

On the other hand, NRO accounts are perfectly suitable for you if:

• You want to store India-based earnings such as dividends, rents, etc., in Indian currency itself.

• You are willing to open a joint account along with a Resident Indian as an account holder.

Adding to the NRE and NRO accounts, which are available in the form of a savings account as well as a current account, there is another account known as FCNR (B) Account.

FCNR (B) Account – ‘FCNR (B) Account’ stands for ‘Foreign Currency Non-Resident (FCNR) Bank (B) Account’. It can also be referred to as ‘FCNR Account’.

The FCNR (B) account helps the individual to transfer their earnings/income earned from foreign sources to India without having to convert the currency into Indian Rupees.

Individuals are able to efficiently hedge against exchange rate-related risks with the help of this account. The noticeable aspect here is that an FCNR account is not a Savings Account or a Current Accounts, instead, it is a term deposit account.

Withdrawal before the maturity period is allowed by banks but the interest gets paid to the customer only after completion of 1 year successfully. FCNR Account can be opened by transferring funds from an already existing NRE Account.

The interest that has been earned with the help of deposits made in an FCNR account is free from taxes. To be more precise, this interest is not taxed in India.

Individuals might also avail a loan against their FCNR deposits, and these loans can be acquired in foreign denominations and Indian currency.

FCNR accounts can be considered a good choice when compared to NRE and NRO accounts because they allow the customer to get the funds they invested, without having to face the volatility of currency exchange rates.

The principal amount and the interest earned from an FCNR account can be easily repatriated to the person’s country of residence. To make things even more interesting, FCNR accounts usually allow overdraft facilities for the customers too.

This makes FCNR accounts the best choice for the people who want to opt for saving money in foreign denominations. Most banks allow depositors to make deposits in currencies such as ‘US Dollar’, ‘Pound Sterling’, ‘Euro’, ‘Australian Dollar’, ‘Canadian Dollar’, ‘Japanese Yen’, etc.

The interest rate that can be obtained from a deposit made in an FCNR account may vary depending on the type of currency. For example, deposits made in GBP might only fetch an interest lower than the interest offered for USD.

There are, however, two major drawbacks when it comes to FCNR accounts. 

The first one is that the individuals are required to maintain the funds in the account until the maturity period is completed. They couldn’t earn interest if they want to get their funds back within 1 year.

Secondly, if there were ever to occur a financial downturn, banks may not be able to return the funds after the completion of the tenure.

Credits can be made into an FCNR account with the help of the following:

• Inward remittances coming from foreign sources

• Interest, which has been accrued from the account balance.

• Interest, which has been derived from investments

• Transfers made from other FCNR accounts

• Maturity Proceeds of an investment, which has been made from the respective FCNR account

• Income such as rents, interests, pensions, dividends, etc.

• Foreign currency that has been converted to Indian currency at the foreign exchange rates of the bank on that particular day.

Debits from an FCNR account can be made into the following:

• Local payments

• Outward remittances (from India)

• Transfers to other FCNR accounts

• Investments in India

How to open an FCNR (B) account – FCNR (B) accounts are also available to the NRIs, PIOs and OCI cardholders. The FCNR Fixed deposit can range from 1 – 5 years and cannot be less than 1 year.

The documents required to open an FCNR account are:

1. Valid Passport Copy
2. Proof of NRI status/PIO status
3. Proof of Address in Overseas and India
4. Indian Pan Card copy
5. Passport size photos
6. A filled account-opening form

The procedure for opening an FCNR account:

1. All these documents are needed to be attested by the Indian Embassy or a Public Notary or anything equivalent to these in the person’s country of residence.

2. FCNR accounts can be opened by inward remittance from overseas. People can also do it by internet banking if they are an existing NRE or NRO account holder. They can also be able to submit a request by contacting the branch directly.

3. Just like the NRO accounts, FCNR accounts can also be opened as joint accounts along with other NRIs or resident Indians who are close relatives.

Deposits can be made into an FCNR account by overseas bank transfer, personal bank cheques, transfers from NRE accounts, or other FCNR accounts and Traveler cheques.

Top NRE Savings Accounts in India – Given below is the list of top NRE accounts available for the Non-Resident people. 

HDFC Bank ‘NRE Account’ – The Funds at HDFC bank for the NRE accounts can be managed via net banking and the remittance service is called ‘Quick Remit’.

The interest rate of the NRE Savings Account at HDFC bank is 3.50% for account balance less than Rs. 50 lakhs and 4.00% for a balance of Rs. 50 lakhs and more. The minimum balance that needs to be maintained is Rs. 10,000 for metro area branches and Rs. 5,000 in the case of rural area branches.

The documents required for opening this account are Passport, PAN Card, FATCA, Proof of Address, Valid Work Permit, CRS Declaration, and CKYC Annexure.

The NRE account types offered at HDFC Bank are NRE Savings, NRE Current, NRE Fixed Deposit and NRE Recurring Deposit.

Interest is paid out on a quarterly basis and the bank also has branches in countries like the UK, Bahrain, Hong Kong, UAE, etc.

Yes Bank: – The Funds at Yes Bank for the NRE accounts can be managed via net banking and the remittance service is called ‘Yes Remit’.

The interest rate of NRE Savings Account at HDFC bank is 6% for account balance less than Rs. 1 lakh and 7.00% for a balance of Rs. 1 lakh and more. The minimum balance that needs to be maintained is Rs. 10,000.

The documents required for opening this account are Passport, FATCA, Proof of Identity, Valid Visa and Proof of Address.

The NRE account types offered at Yes Bank are NRE Savings and NRE Fixed Deposit. Yes Bank also has overseas branches in countries such as Singapore, UK, Dubai, etc.

‘Axis Bank ‘NRE Account’ – The NRE account of axis bank can be managed with internet banking and the remittance service is known as ‘Remit Money’.

The interest rate of the NRE Savings Account at HDFC bank is 3.50% for account balance less than Rs. 50 lakhs and 4.00% for a balance of Rs. 50 lakhs and more. The minimum balance that needs to be maintained is Rs. 10,000.

The documents required are Passport, Valid Visa, Proof of Address, Identity Proof and FATCA.

The NRE account types offered at Axis Bank are NRE Savings, NRE Prime Savings, NRE Salary and NRE Fixed deposit.

The interest is calculated on a daily basis and is paid out to the customer on a quarterly basis. Axis Bank also has branches in countries like Hong Kong, Singapore, UAE, etc.

Citibank – The Funds at Citibank for the NRE accounts can be managed or repatriated via net banking and the remittance service is called ‘Citibank Global Transfer’.

The interest rate of NRE Savings Account at HDFC bank is 3.50% and the minimum amount to open is USD 5,000 for people in the USA and Canada.

The documents required for opening this account are Passport, PAN Card, FATCA, Proof of Address, Valid Work Permit, CRS Declaration and CKYC Annexure.

The NRE account types offered at Citibank are NRE Regular Checking, NRE Prime Checking and NRE Gold Checking. Interest is paid out on a quarterly basis and the bank also has branches in countries like UK, USA, Australia, UAE, Canada, etc.

Kotak Mahindra Bank – The Funds at Kotak Mahindra Bank for the NRE accounts can be repatriated via net banking and the remittance service is called ‘Click2Remit’.

The interest rate of the NRE Savings Account at Kotak Mahindra bank is 4% and the average monthly minimum balance of Rs. 10,000.

The documents required for opening this account are Passport, PAN Card, FATCA, Proof of Address and Valid Visa.

The NRE account types offered at HDFC Bank are NRE Savings, NRE Current, NRE Fixed Deposit and NRE Recurring Deposit. Interest is paid out on a quarterly basis and the bank also has branches in countries like UK, USA, Singapore, UAE, etc.

State Bank of India – The Funds at State Bank of India for the NRE accounts can be repatriated via net banking.

The interest rate of NRE Savings Account at HDFC bank is 3.50% for account balance less than Rs. 1 crore and 4.00% for a balance of Rs. 1 crore and more. The minimum balance that needs to be maintained is Rs. 3,000 for urban branches, Rs. 2,000 for semi-urban branches and Rs. 1,000 for rural area branches.

The documents required for opening this account are Passport, PAN Card, FATCA, Proof of Address and Valid Work Permit.

The NRE account types offered at HDFC Bank are NRE Savings, NRE Current and NRE Fixed Deposit and the bank also has branches in countries like UK, USA, Australia, UAE, etc.

Top NRO Savings Accounts in India – Given below are the top NRO savings accounts available in India.

Standard Chartered Bank – The interest rate for the NRO savings accounts at Standard Chartered bank is 3.50% and the average balance that needs to be maintained is Rs. 25,000.

People who want to open an NRO account at Standard Chartered bank can apply for it online. 

Individuals get access to a Visa Platinum Debit Card which is valid globally. Some other attractive features include High ATM withdrawal limits, High purchase limits, Zero fuel surcharge across petrol pumps in India, Dining discounts & offers, etc.

Kotak Mahindra Bank – The interest rate for the NRO savings account at Kotak Mahindra Bank is 4.00% and the average balance that needs to be maintained is Rs. 10,000.

People who want to open an NRO account at Kotak Mahindra Bank can apply for it via post branches.

People who open an NRO account at Kotak Mahindra bank get access to an international debit card and a checkbook. Banking services can be availed from anywhere, regardless of the location.

IDFC Bank – People can earn 6% interest up to Rs. 1 lakh, 6.5% interest for Rs. 1 – 2 lakhs and 7% for Rs. 2 lakhs and more. The average balance that needs to be maintained is Rs. 25,000 on a monthly basis.

People who want to open an NRO account at IDFC bank can apply for it online. 

Some exclusive features include unlimited free funds transfer in India and no-cost transactions for accounts having more than Rs. 25,000 average balance.

Yes Bank – The interest rate for the NRO savings accounts at Yes Bank is 6% for account balance more than Rs.1 lakh and 5% for account balance less than Rs. 1 lakh. The average balance that needs to be maintained is Rs.10,000 on a quarterly basis.

People who want to open an NRO account at Yes Bank can apply for it by visiting one of the branches. A free international debit cum ATM card is offered to individuals along with a checkbook. 

ICICI Bank – The interest rate for the NRO accounts at ICICI Bank is 3.50% and the average balance that needs to be maintained is Rs. 15,000 on a quarterly basis.

People who want to open an NRO account at ICICI Bank can apply for it via post branches. A free international debit cum ATM card is offered to individuals along with a checkbook. 

HDFC Bank – The interest rate for the NRO accounts at HDFC Bank is 3.50% and the minimum balance that is needed to be maintained is Rs. 10,000 on a quarterly basis.

People who want to open an NRO account at HDFC Bank can apply for it via post branches.

Some of the exquisite features include Easy Online Money Transfer, Tax-Free interest, ability to invest in Mutual Funds, etc. The customers are also provided with an Easy Shop NRO debit card, ATM card and a checkbook.

Top banks for FCNR accounts in India – Given below are some of the top banks for opening FCNR accounts in India.

State Bank of India – The interest rates for FCNR accounts at State Bank of India from 10^th August 2020 are as follows:

HDFC Bank: The interest rates for FCNR accounts at HDFC Bank from 1^st September 2020 are as follows:

ICICI Bank: The interest rates for FCNR accounts at ICICI Bank from 1^st September 2020 are as follows:

Axis Bank: The interest rates for FCNR accounts at Axis Bank from 10^th August 2020 are as follows:

The data shown in the given tables is for the understanding of the general interest rates of these banks. The interest rate, however, may vary depending on the actual account balance and other conditions.

The numbers given are the annual percentage rates of the following banks. For data shown like ‘2 – 3 years’, it means greater than or equal to 2 years but less than 3 years. For ‘1 – 2 years’, it means greater than 1 year and less than 2 years.

Savings accounts for people returning to India:

First of all, there are some requirements for people returning to India. They are:

• They should make changes in their residential status for tax purposes.
• They should convert the existing NRO, NRE and FCNR accounts.

Some other changes would be required such as a change in investments, change in the insurance policy, etc. 

As discussed above, NRIs cannot hold regular local bank accounts in India, while staying overseas. They would have to maintain accounts known as NRE accounts, NRO accounts and FCNR accounts. 

People who have moved back to India should be converted into a resident savings account. If they fail to do so, they would be violating the rules of the Foreign Exchange Management Act. This process should be done within a couple of months after moving to India.

However, individuals having FCNR accounts might continue with them until the maturity period under the same interest rate. 

For example, if a person makes a deposit in FCNR account for a tenure of 5 years and moves to India after 2 years of opening the account, he/she can still have the account for the tenure of 5 years.

After the maturity period, the respective person should convert their account into a Resident Rupee Deposit Account or Resident Foreign Currency Account (RFC). The interest rate earned from RFC accounts will not be taxed until the person enjoys the RNOR (Resident but not Ordinarily Resident) status. 

RFC Account – One of the best options available for the non-resident people who have returned to India is a ‘Resident Foreign Currency (RFC) Account’. As the name itself suggests, an RFC account is helpful for the people to maintain foreign currency.

The funds in an RFC account can be easily repatriated. This type of account also allows credits from foreign sources in foreign currency, which have been acquired from the sale of assets outside India or any other income obtained outside India.

Procedure – A returning NRI should fill the declaration of NRE/NRO account to a Resident Rupee Savings Account or an RFC account. Details such as account number, joint holder details (if any), customer id, etc., should be filled and signed by the account holders. These details should be submitted at a local branch of the bank.

Eligibility – The eligibility criteria for the people, who can open an RFC account is as follows:

• Resident Indians could open an RFC in any easily convertible foreign currency.
• NRIs, who had been overseas for a period of 1 year or more and have returned to India.

People having an FCNR account or an NRE account could easily convert them into an RFC account. Usually, Financial Institutions and Banks help in providing assistance for opening an RFC account.

Currencies – RFC accounts can be maintained in freely convertible currencies such as USD, CAD, EURO, GBP, JPY, AUD, etc.

Types of RFC accounts – There are 3 types of RFC accounts, which are ‘Savings Accounts’, ‘Current Accounts’ and ‘Term Deposits’.

Types of funds that can be stored in an RFC account – Let us have a look at the type of funds that can be maintained within an RFC account.

• Funds in a foreign bank account, which belong to that country’s currency. This can be business income or employment income earned overseas.

• Superannuation, pension, etc., which have been earned as an NRI from a foreign employer.

• Forex received on selling assets such as shares, bank account, immovable property, etc., which used to be held by the individual abroad.

• Funds from NRE or FCNR accounts can be deposited in RFC accounts without penalty if a person attains the resident status.

• Foreign currency notes of different denominations, which have been brought from overseas. If the value exceeds $5,000 or the traveler’s cheque value is over $10,000, the person would have to submit a currency declaration form to the customs authorities.

These funds stored within an RFC account can be utilized for making investments, payments, outward remittance, etc.

Almost all the banks in India offer RFC accounts to the individuals and the interest rates differ depending on the type of currency.

Conclusion – The process of saving money, whether living abroad or returning to India, can be time taking and hard. Individuals are required to have a thorough understanding before making decisions related to this.

That being said, if you require some more information regarding this topic or if you want someone to take care of all the activities on your behalf, you can avail of the banking-related services offered by us.