Saturday, April 2, 2016

10 Benefits of NRE Bank Account and Fixed Deposits

If you are an NRI (Non-Resident Indian) then you have access to a unique bank account called NRE (Non-Resident external) account which allows you to keep your money in Indian rupees. This account then further allows you one of the best, fixed deposit investment option known as NRE fixed deposit, which currently provides fixed and interest rate e.g. 8.75% from Deutsche bank, resulting in a cumulative yield of 10.3% for a 5 years NRE fixed deposit. It's not just the Deutsche bank but other private and public sector banks like SBI, ICICI, HDFC, Kotak Mahindra, YES Bank they all provide very good returns on NRE fixed deposits.

Since many NRI are not aware of all the features, benefits and advantages of NRE accounts, I am going to share them here for your quick reference. NRE account is a must for any NRI who wants to invest in India or want to keep his money on Indian rupees, given the current USD to INR exchange rate which is around 66 INR for one USD, it's also a good time to open NRE fixed deposit.

Features, Benefits and Advantages of NRE account

There are different types of NRE account e.g. NRE saving and current account and NRE fixed deposit, all the features we are discussing here are applicable to both NRE saving account and NRE FDs.

1) Tax Benefits
This is the single most important reason and benefit of opening NRE accounts. Interest earned on NRE saving account as well on NRE fixed deposit is tax-free in India (see here). They are not counted even in your taxable income, in case you have some income in India. Due to this feature, NRE fixed deposits are one of the most secure and high yield investment option only available to NRIs.

2) Repatriation Benefits
Another key advantage of NRE account is repatriation benefits. NRE saving account allows easy movement of funds because both you can repatriate both interest and principle abroad. Funds in NRE accounts are fully and freely repatriable.

3) Low Balance required
Due to increased competition among public and private sector banks e.g. SBI, ICICI, HDFC, Axis bank and YESBANK, the minimum balance required has dropped significantly. Nowadays many banks including ICIC, HDFC and Kotak requires just Rs 10,000 as a minimum balance. Here is nice comparison which will help you to choose the best bank to open NRE account.

4) High-interest rate
Both NRE saving account and NRE fixed deposit offer high-interest-rate though this varies between bank to bank. Some banks like YESBANK offers around 6% interest rate for a certain amount in your saving account but most of the bank like ICICI and HDFC gives 4% per annum. The good part is that interest rate is calculated on daily closing balance and interest is paid half-yearly in June and December. This may vary depending upon the bank, so best is to check with your bank in case of any doubt. You can use tool mentioned in this article to compare interest rate of different banks before opening NRE fixed deposit.

5) Convenience benefits
One more advantage of NRE accounts is convenience. It's easy to open an NRE account. Most of the banks allow you to open NRE account online. You just need to fill a form online, take a printout, attach the self-attested copy of required documents and courier to the bank in India. Some bank even provides free pick up of documents and some other has Free PO Box Service to send your documents depending upon which country you live. Usually, Indian banks have better coverage for Singapore, HongKong, USA, UK, Canada and UAE e.g. SBI has facilitation centers in Singapore to open NRE account right from Singapore, a great benefit for Singapore NRIs.

6) Joint holding
Another key benefit of NRE account is that you can jointly open it with another NRI e.g. your wife or your children. I have already mentioned the benefit of joint accounts, e.g. it's one of the best ways to manage your funds as your partner can operate along with you. Having joint holding facility for NRE account just makes it more attractive. See here for more details of how to open joint  NRE accounts.

7) Mandate Holder Benefits
This is one more unique advantage of NRE saving accounts which allows you to appoint a mandate to operate your account for your behalf. The mandate is nothing but an authorization is given to a person to operate the customer's bank account on his behalf. Banks like ICICI and HDFC issues free cheque book and ATM card for mandate holder. Many NRIS make their parents as mandate holder so that they can access the fund when they need. Here is a guide to tell you how to appoint a mandate holder in NRE account.

8) Investment Benefits
Many banks like HDFC and Axis bank allows NRIs to invest in Mutual funds by linking their NRE saving account to Investment savings account.

9) NRI Advantage
Since many Indian banks now have a global offering, opening an NRI account allows them to handpick exclusive offers catering to your needs both in India and abroad.

10) Accessibility Advantage
NRI saving account usually comes with Internation Debit card, at least, I know that HDFC bank, Kotak Mahindra and ICICI does provide an International debit card to NRE account holder. This gives you the unique accessibility advantage of shopping worldwide, booking air tickets online, buying health and life insurance, and withdrawing cash at abroad. Though, beware, exchange rates are not best and there are charges associated with international transactions especially cash withdrawal.

Here is a brief summary of what is NRE account and some of it's important features.

10 advantages of NRE Bank Account and Fixed Deposits

That's all about benefits and advantage of NRE saving account and fixed deposit. As I said, it's a unique account for NRI and every Nonresident Indian should take advantage of NRE accounts. Most important feature is tax benefits it offer which can result in more than 10% yield in fixed deposits, which is the best, no risk investment option in my opinion. NRE accounts ar also the most convenient way to use your foreign earnings in India and it also fully and freely repatriable.


  1. Thanks a ton for the detailed info, Appreciate it :).

  2. Great info thanks

  3. However the tax for the untaxed portion of your NRE FD needs to be paid in your resident foreign country

  4. It's been more than an year since this article. Has anything changed in since then?

  5. SBI has changed the IFSC codes of as many as 1,300 branches due to a merger and has also changed the names of many branches. The bank will automatically
    map the old IFSC codes with new ones for all customers. Changes have been made to SBI Bank IFSC codes