Being an NRI (Non-Resident Indian), managing expenses and savings could pose a complex challenge. Potential earnings in the two countries present a unique difficulty in managing finances and repatriating money to India. This is where the concepts of Non-Resident External Account (NRE) deposit and Non-Resident Ordinary (NRO) account come to the rescue. NRE and NRO accounts are designed to cater to NRIs worldwide. As NRIs cannot hold savings accounts in India, NRE and NRO accounts fill the gap.
In this article, we will understand the meaning of NRE deposits, their features and eligibility, and their associated advantages. You can also learn more about NRE vs NRO fixed deposits to understand their use cases.
What is an NRE deposit
The guidelines of the Foreign Exchange Management Act (FEMA) do not permit NRIs to have a savings account in India under their own name. However, you can put your earnings and savings into the NRE and NRO accounts.
As an NRI, you can deposit your earnings from a foreign country in an NRE account in India. This account can be a savings, recurring, or fixed deposit account. NRE accounts hold money in the Indian currency. Moreover, they are exempted from taxes. This means the money you deposit in the account will be converted to Indian rupees. The only prerequisite is that the deposited money must be earned in a foreign country. The purpose of the account could differ, but it enables NRIs to conduct business, make investments, and manage personal finances.
Also read: How to earn money from FD
Features of an NRE deposit
- Investment duration: The tenure of an investment in an NRE deposit can range from 1 to 10 years.
- Currency for deposits: The deposits are made in Indian rupees, and the account can be easily set up through internet banking.
- Automatic renewal option: NRE deposits come with the option for automatic renewal.
- DICGC insurance protection: The Deposit Insurance and Credit Guarantee Corporation (DICGC), under the Reserve Bank of India, provides insurance coverage to all NRE deposits with a maximum compensation of Rs. 5 lakh in case of any defaults.
- Nomination: You can pick a nominee for your scheme.
- Financing against fixed deposit: With the NRE deposit, you can obtain a loan or an overdraft that can go as high as 95% against the deposited sum.
- Deposit ceiling: The actual deposit limits differ among institutions, and thus, doing your research and due diligence is important.
Eligibility for investing in an NRE fixed deposit
With its diverse features, investing in an NRE fixed deposit as an NRI is an attractive option. With simple terms of eligibility, you can open an NRE fixed deposit if you meet the criteria mentioned below:
- You are an NRI or a Person of Indian Origin (PIO) or an Overseas Citizen of India (OCI)
- You have an NRE savings account
Also read: FD eligibility and documents
Benefits of NRE account
Following are a few of the key advantages of NRE account:
- Investment and account opening: You can use the Indian currency for investing in fixed deposit accounts and leverage internet banking services for NRE fixed deposit opening.
- Free repatriation of funds: As an NRI, utilising the NRE deposit, you can freely repatriate interest and capital to your country.
- High interest rates: The NRE fixed deposit rates of interest tend to be higher than regular savings accounts.
- Flexible terms: NRE deposits can be opened for 1-10 years.
- Emergency closure provision: The NRE deposit allows early closure for account holders in case of financial emergencies.
- Loans and overdraft: Banks offer loans against NRE fixed deposits, along with overdrafts up to 95% of the corresponding NRE deposit balance.
- Automatic renewal provision: Upon maturity, NRE fixed deposits can be automatically renewed as the funds are reinvested in the NRE account.
Conclusion
The NRE deposit offers NRIs a seamless financial solution. With tax-free deposits, free repatriation, higher interest rates, high liquidity and flexible terms, they provide opportunities for lucrative investments and repatriation. Eligibility for investing in an NRI fixed deposit is simple, offering NRIs, PIOs, and OCIs with NRE savings accounts greater convenience. NRE deposits ensure financial security with insurance coverage and convenience with automatic renewal and nomination options. In essence, they serve as a cornerstone for NRIs, simplifying cross-border financial management.
