Wednesday, February 12, 2014

Yes, Transfer Money form NRO to NRE Saving Account, FCNR is Allowed

Not many NRIs (Non resident Indians) knows that, from May 2012, NRI can transfer fund from NRO account to NRE account in India. Earlier this was not the case, though you can transfer funds from NRE to NRO account, reverse was not allowed. Only way to fund your NRE saving account was through your offshore income earned in foreign currency. Things has changed, The Reserve Bank now allows non-resident Indians (NRIs) to transfer funds from non-resident ordinary (NRO) account to Non-Resident External (NRE) account subject to a ceiling of $1 million in a financial year. This move is encouraging as now NRI can make maximum use of their funds and can transfer to overseas, when they needed or when they feel its better investment opportunity. As I have said before, an NRE saving account is for depositing income from abroad, while an NRO saving account is mainly for putting Indian incomes. There are also few more important difference between them e.g. In case of NRE account, only NRIs can become joint account holders but for NRO account both resident and non-resident can become joint account holders, you can see my post 5 difference between NRE and NRO accounts for more detail.

Saturday, February 8, 2014

Can you break FCNR Deposit before Maturity - Premature Withdrawal Penalty, ICICI, SBI, Kotak, HDFC Bank

Recently one of my friend ask me about breaking his FCNR fixed deposit, which he has recently done for 3 years, when banks was offering high interest rates up to 5%. He has opened his FCNR deposit with ICICI bank and was in need of some money in short term. He wasn't aware that ICICI bank doesn't allow you to break your FCNR fixed deposit if its for tenure of 3 years or higher. So he eventually ended up borrowing money at higher interest rate. This brings an important point about opening FCNR fixed deposit, you must know the closure requirement for your FCNR deposits, asking simple questions like, can I break my FCNR Deposit before the maturity period? to bank relationship manager is the best thing to do. AS I had said previously, in case of breaking your foreign currency Non resident fixed deposit, you may end up getting nothing or lower than expected rate, but in some special cases like this, you might not even able to withdraw your money. As a revision, here I am sharing what every NRI investor should know about closing a FCNR fixed deposit before completing its tenure. Terms and conditions vary from bank to bank, but you will get an idea, what could happen if you think of breaking foreign currency non resident deposit. This is also a good guide for Non resident Indians, which are thinking to park their extra/surplus dollars in Foreign currency deposits. Just a note, this more than 3 years withdrawal penalty is mainly because of RBI's move of offering forward SWAP deal at rate of 3.5% as against the current market rate of 7% last year, when Rs was tumbled to record low, almost touching 1:69 against US Dollar. Since that rate was only for tenure of 3 years or more than 3 years, banks are now locking in money to avoid any losses. By the way FCNR is not the only option, you can also earn high interest rates on NRE and NRO deposits, but before that you should know difference between NRE, NRO and FCNR fixed deposits.

Thursday, January 30, 2014

NRI vs NRO vs FCNR - Which Savings or Fixed Deposit Account NRI should Open

Non Resident Indians, who wants to invest money in India, must first open a saving bank account. This will not only help you to easily remit money to India but also to transfer Indian rupees to your friends, relatives and parents. You can also pay bills on behalf of parents, recharge mobile phones, pay DTH charges etc. If you have aged parents, then you can really help them to pay their bills online using your Indian Rupees NRE or NRO Saving accounts, I have open NRO accounts for just that purpose. Anyway, there are mainly three basic types of banks accounts for non resident Indians, NRE, NRO and FCNR. NRE stands for Non resident external, NRO stands for Non Resident ordinary and FCNR stands for Foreign currency Non resident account. Each of this account has distinguish feature and they are for different need. I have covered some key differences between NRE and NRO saving accounts earlier, but given the confusion between these three, I decided to summarize features of these accounts together. In this article, we will learn how to choose between NRI vs NRO vs FCNR accounts. TL;DR, basically it all depends upon your need, if you want to avoid exchange rate risk then FCNR is way to go, if you wan to keep your savings on INR then go for NRE because interest earned are tax free, if you want to keep INR earned by dividend or rent then NRO is the right account to choose.

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