NRI Guide

Non-Resident Indians (NRIs) have multiple investment opportunities in the present day scenario in terms of real estate investment in India, savings and deposits. Provision of home loans and other monetary schemes have made investment procedures easy and convenient.

If you are looking to migrate back to India or planning to invest in property, houses and real estate in India then a home loan can be one of the most suitable options for you. There are several financial organizations specializing in financing and mortgages for NRI’s. Most of the prominent banking and financial institutions offer home loans in India such as ICICI Bank, HDFC, HUDCO, CITIBANK, LIC etc. You can get a loan amount upto 85% of the cost of the property, including cost of the land, whichever is lower. The rate of interest will vary from 11.25% to 14.25% per annum depending on the financial institution. The loan processing fee will vary between 1% to 2% of the loan amount applied for.

Investments can be made in terms of savings and deposits such as:

FCNR Accounts:

NRIs are permitted to open foreign currency Non-resident (FCNR) account which can be opened in any permitted currency i.e. a foreign currency which is freely convertible. However, opening of FCNR accounts in the name of NRI’s of Bangladesh or Pakistan nationality ownership requires approval of the RBI. These accounts are opened for periods ranging from 12 months to 5 years. FCNR a/c’s may be opened with a remittance in the designated currency received from abroad or by conversion of a remittance in any other convertible foreign currency into the designated currency at the risk and cost of the customer. On maturity, payment shall be made in foreign currency/Indian Rupees, as desired by the depositor. For deposits of all maturities contracted after November 23, 2011, interest shall be paid within the ceiling rate of LIBOR/SWAP rates plus 125 basis points for the respective currency/corresponding maturities.

On floating rate deposits, interest will be paid within the ceiling of SWAP rates for the respective currency/maturity plus 125 basis points. For floating rate deposits, the interest rate period shall be six months.

RFC Accounts:

NRIs returning to settle in India are eligible to maintain Resident Foreign Currency (RFC) accounts. These accounts can be held singly or jointly in the names of eligible persons. Such accounts can be maintained in the form of savings bank, current accounts and term deposits where the holders are individuals and in the form of current or term deposit account in all other cases.

Term deposit accounts:

Term deposits can be opened by remittances from abroad or by transfer of funds from existing NRE/FCNR/NRO/NRSR accounts of the same person with other banks in India or from other branches of the bank or by tendering foreign currency notes/ travellers cheques brought by NRI’s during their visit to India.

Non-resident (Non-repatriable) Rupee Deposit Scheme:

These accounts can be opened by way of transfer of funds from abroad or from existing NRE/FCNR accounts. Deposit periods ranges from 6 months to 3 years and the deposits are maintained in Indian Rupees only on a non-repatriable basis. However, only the interest accrued on the deposits can be repatriated.

Non-resident Ordinary (NRO) Rupee Account Scheme:

The legitimate dues in India of the account holders viz, rent, dividend, interest, sale proceeds of securities, property, etc. can be credited to these accounts and balances can also be placed in term deposits. Proceeds of remittances received in any permitted currency tendered by the account holder through normal banking channels can be credited to this account.  Balances in the account are not eligible for remittance outside India without the prior approval of the RBI.

Special term deposit accounts:

These are reinvestment deposits. Interest earned on these deposits are added to the principal and compounded at quarterly intervals. The principal amount together with interest is repaid on maturity of the deposit.

Cash certificates:

All conditions pertaining to Special Term deposits are applicable for Cash Certificate Deposits.

Thrift Deposit Scheme:

It is a recurring deposit scheme where fixed sums are deposited every month for a fixed period. Compound interest is payable at the same rates as applicable to other term deposits. Loan facility is also available.

Unit Deposit:

It is a fixed deposit scheme wherein you can withdraw your deposit to the extent of your need and leave the remaining amount undisturbed to earn you interest at the contracted rate.

Apart from these NRIs are permitted to make direct investments in proprietary/partnership concerns in India on a non-repatriation basis. NRIs are also permitted to invest in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchanges in India. These facilities are granted both on repatriation and non-repatriation basis.

NRI section of the RBI:

The Reserve Bank of India (RBI) has got a special section of Foreign Exchange Management Act (FEMA), 1999 dedicated for the Non-Resident Indians (NRIs). This section includes the legal framework for administration of exchange control in India provided by the FEMA.

Under this Act, freedom has been granted for buying and selling of foreign exchange for undertaking current account transactions. However, the Central Government has been vested with powers in consultation with Reserve Bank to impose reasonable restrictions on current account transactions. Accordingly, the Government has issued Notifications GSR.381 (E) dated May 3, 2000, and S.O. 301(E) dated March 30, 2001, imposing certain restrictions on current account transactions in public interest.

These details are available on the Bank’s website besides with the authorized dealers and regional offices of the Foreign Exchange Department. Our experience so far has been that the residents like to get information on several matters relating to various current account transactions and other incidental issues. This pamphlet attempts to answer all questions in simple language. While preparing replies to questions, special care has been taken to ensure that the replies are drafted in simple words and reference to technical details are avoided.

The Foreign Exchange Management Act, 1999 (FEMA), has come into force with effect from June 1, 2000. With the introduction of the new Act (in place of FERA), certain structural changes have been introduced and now all transactions involving foreign exchange have been classified either as Capital or Current Account transactions. All transactions undertaken by a resident that do not alter his assets or liabilities outside India are current account transactions. In terms of Section 5 of the FEMA, persons are free to buy or sell foreign exchange for any current account transaction except for those transactions on which Central Government has imposed restrictions, vide its Notification No.G.S.R.381(E) dated May 3, 2000 (as amended from time to time). Full text of the said Notification is available in the Official Gazette. It is also available as annexure to our Master Circular on Miscellaneous remittances available at RBI’s website

Incidentally, no release of foreign exchange is admissible for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan.

Buying Property in India:

Buying a house is not a Herculean task for the NRIs anymore as availability of NRI Housing Loan makes property investment a lot more convenient. Any individual staying abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad are eligible for a NRI Housing loan. Apart from that, government servants posted abroad on duty with the Indian missions or deputed abroad on assignments with foreign Governments or regional/international agencies are also entitled to these loans.

The NRI Housing loan is offered by some of the premier financial institutions and bankers in India such as ICICI Bank, HDFC, HUDCO, CITIBANK, LIC etc. As an NRI, you can avail a maximum loan of Rs.1 crore or 85% of the cost of the property, including cost of the land, whichever is lower. The rate of interest will vary from 11.25% to 14.25% per annum depending on the financial institution. At the time of making application for the loan a processing fee is payable which will vary between 1% to 2% of the loan amount applied for depending on the institution.

The amount of loan to be borrowed will depend upon a person’s repayment capacity. Repayment capacity takes into consideration factors such as income, age, qualifications, work experience, number of dependants, spouse’s income, assets, liabilities, stability and continuity of occupation, alternate employment prospects when the concerned person returns to India and savings history.

While applying for a home loan in India the following documents are to be submitted along with the application:

Employment/Residency related documents:

  • Employment contract
  • Latest salary slip
  • Latest work permit
  • Identity card issued by current employers
  • Visa stamped on the passport
  • Continuous Discharge Certificate (if applicable)
  • Overseas Bank Account Statement for the last four months

Property Related Documents:

  • Receipts for payments made for purchase of the dwelling unit
  • Copy of approved drawings of proposed construction/purchase/extension
  • Agreement for sale/sale deed/detailed cost estimate from Architect / Engineer for property to be purchased / constructed / extended
  • Allotment letter from the co-operative society/association of apartment owners

Power of attorney:

Once the loan is sanctioned, the period of repayment of the loan is determined which normally falls in the range of three to ten years. Loan can be repaid through Equated Monthly Installments (EMIs) comprising of principal and interest. Repayment by way of EMI commences from the month following the month in which you take full disbursement. EMI is payable every month, by the end of that month. EMI payments are to be made through post dated cheques from your NON-Resident (External) Account/Non-Resident (Ordinary) Account in India.

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