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    Chapter 10

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    Chapter 10

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    Chap X

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    Chapter 10

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    of 6

    CHAPTER – X

    NON-RESIDENT ACCOUNTS – GENERAL GUIDELINES


    10.1. Definitions of residents and non-residents

    (i) In terms of Section 3 (b) of FEMA 1999, no person in India can, without
    the general or special permission of the Reserve Bank of India (RBI)
    make any payment to or for the credit of any person resident outside
    India. Accordingly Authorised Dealers require a general or special
    permission from the Reserve Bank for opening and operating accounts in
    the names of non-residents.

    (ii) The accounts of persons, resident outside India are permitted to be


    maintained with the Authorised Dealers in Rupees as well as in
    permitted Foreign currencies subject to the conditions detailed in
    Regulation 5 of Foreign Exchange Management (Deposit) Regulations,
    2000 and Notification No.FEMA 5/2000-RB dated 3.5.2000 issued by
    the Reserve Bank of India, thereunder.

    10.2. Persons Resident in India:

    In terms of Section 2(v) of the Foreign Exchange Management Act 1999, a


    “Person Resident in India” means: -

    (i) a person residing in India for more than one hundred and eighty two days
    during the course of the preceding financial year but does not include:
    -

    A) A person who has gone out of India or who stays outside India,
    in either case

    a) for or on taking up employment outside India or

    b) for carrying on a business outside India or a vocation outside


    India

    c) for any other purpose in such circumstances as would indicate


    his intention to stay outside for an uncertain period.

    B) a person who has come to or stays in India in either case, otherwise


    than: -

    a) for or on taking up employment in India or

    b) for carrying on in India a business or vocation in India or


    c) for any other purpose, in such circumstances, as would indicate
    his intention to stay in India for an uncertain period.

    (ii) any person or body corporate registered or incorporated in India

    (iii) an office, branch or agency in India, owned or controlled by a person


    resident in India.

    (iv) an office, branch or agency outside India owned or controlled by a


    person resident in India.
    10.3. Non Residents:
    In terms of Section 2(w) of the Act, a "person resident outside India" means a
    person who is not a resident of India, (as detailed in Section 2 (v) of the Act).
    10.4. Non-Resident Indians:
    (i) In terms of Regulation No.2 (vi) of Foreign Exchange Management
    (Deposit) Regulation, 2000 and Notification No. FEMA 5/2000-RB
    dt.3.5.2000 issued by the Reserve Bank of India thereunder, a 'Non-
    Resident Indian (NRI) means a person resident outside India who is a
    citizen of India or is a person of Indian Origin.
    (ii) Non-Resident Indians generally fall under one of the following
    categories: -
    a) Indian citizens who stay abroad for employment or carrying on
    business or vocation or for any other purpose, under circumstances
    indicating an indefinite period of stay abroad;
    b) Government servants (both Central and State) and other officials of
    Public Sector Undertakings who are deputed or posted abroad on duty
    (including diplomatic missions);
    c) Indian citizens working abroad on assignments with foreign
    governments or regional/international agencies like the World Bank,
    IMF, WHO, ESCAP etc.,
    d) Indians who have settled abroad permanently;
    e) Indians who have gone abroad on emigration.
    g) Students going abroad for studies.

    (iii) These persons become "Residents" in India, only when they come back to
    India for employment or for carrying on any business or vocation or for
    any other purpose, indicating an intention for an indefinite duration of
    stay in India. They are not regarded as "Residents" in India when they
    come here on a temporary visit - say for holidays, business, etc.

    10.5. Persons of Indian Origin (PIO):

    (a) For the purpose of opening & maintenance of various types of bank
    accounts and making investments in shares and securities in India, a
    Person of Indian Origin means a citizen of any country other than Pakistan
    or Bangladesh if: -

    (i) he / she at any time held an Indian Passport or


    (ii) he / she or either of his / her parents or grand-parents was a citizen of
    India by virtue of the Constitution of India or Citizenship Act 1955 (57
    of 1955).
    (iii) The person is a spouse of an Indian Citizen or person referred to under
    (i) or (ii) above
    (b) Opening of non-resident accounts of Pakistani/Bangladeshi nationals
    requires the prior approval of the Reserve Bank of India.
    Note: For the purpose of investment in immovable property, a Person
    of Indian Origin means an individual (not being a citizen of Pakistan or
    Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or
    Bhutan),
    (i) who at any time held Indian Passport
    or
    (ii) who or either of whose father or whose grandfather was a Citizen
    of India by virtue of the Constitution of India or the Citizenship
    Act 1955 (57 of 1955).

    Note:- Overseas Citizenship of India scheme formulated by


    Governmemt of India for the persons of Indian origin (PIOs)
    who are the citizens of countries other than Pakisthan and
    Bangladesh, if the laws of the country, of which their
    citizen,permit dual citizenship.
    10.6. Overseas Corporate Body (OCB): (Annexure 08 and 09, Certificate from
    Chartered Accountants with regard to ownership)
    (i) An Overseas Corporate Body means a company, partnership firm, society
    and other corporate body owned directly or indirectly to the extent of at
    least sixty percent by Non-Resident Indians and includes overseas trust in
    which not less than sixty percent beneficial interest is held by Non-Resident
    Indians directly or indirectly but irrevocably.
    (ii)Reserve Bank of India vide AP(DIR) Cir no.14 dated 16.09.2003 has
    directed that Overseas Corporate Bodies (OCBs) have been derecognised as an
    eligible ‘class of investors’ under various routes/schemes available under extent
    Foreign Exchange Management Regulations. Accordingly, branches should not
    open NRE/FCNR/NRO Accounts in the name of OCBs and no renewal of the
    existing deposits shall be made after their original maturity period.

    (iii) Branches may also note the instructions given by the Reserve Bank not to
    allow operations in the accounts of specific OCBs without their prior permission
    shall continue to be operative.
    10.7. Accounts of certain Non-Residents treated as Resident Accounts:
    Although the undernoted categories of persons, firms, companies, etc., are
    treated as resident outside India under FEMA 1999, by virtue of the Reserve
    Bank of India’s Notification No.FEMA 17/RB-2000 dated the 3rd May 2000,
    their rupee accounts with Authorised Dealers in India are regarded as resident
    accounts and such accounts may be opened and operated upon freely subject to
    all the terms and conditions as are applicable to any other resident account.
    a) A person who is a citizen of India, Nepal or Bhutan, resident in Nepal or
    Bhutan.
    b) A branch situated in Nepal or Bhutan of any business carried on by a
    company or a corporation incorporated under any law in force in India,
    Nepal or Bhutan.
    c) A branch situated in Nepal or Bhutan of any business carried on as a
    partnership firm or otherwise, by a citizen of India, Nepal or Bhutan.
    10.8. In terms of Regulation No.5 of Foreign Exchange Management (Deposit)
    Regulations, 2000 and vide RBI Notification No.FEMA 5/2000-RB dated
    3.5.2000 issued thereunder, an authorised dealer in India may accept deposit
    under: -

    i) Non-Resident (External) Account Scheme (NRE account) from a non


    resident Indian or an overseas corporate body

    ii) Foreign Currency (Non-Resident) Account Banks Scheme (FCNR-B


    account) from a non-resident Indian or an overseas corporate body.

    iii) Non-Resident (Ordinary) Account Scheme, (NRO account), from any


    person resident outside India.

    10.9. Nomination facility is available for all types of Non-Resident accounts. Such
    nominations can be made in favour of any resident/non-resident. The
    nomination if desired by the depositor should be made in form DA-1 annexed
    to the Account opening form (FED 2-141). Such nomination should be
    registered & recorded in the manner prescribed by H.O.

    10.10. The related guidelines relating to the opening of and allowing of operations
    under the above accounts are given in the following chapters.

    10.11 Safeguards to be adopted for preventing frauds in Non-Resident accounts.

    In the light of the continuing reports of instances of frauds / malpractices in


    respect of granting of loans / advances / other credit facilities on the security of
    Non-Resident deposits either to the account holders themselves or to third
    parties, the following safeguards should be adopted by the branches: -

    10.12 Banks are prohibited from granting fresh loan or renewing existing loan in
    excess of Rs.20.00 lakhs against NR (E) Rupee Account and FCNR (B) deposits
    either to the depositors or third parties (HOC 27/2007). Branches should not
    undertake artificial slicing of the loan amount to circumvent the ceiling.

    10.13 Additional safeguards to be ensured while closing the Non-Resident Deposit


    Accounts.

    i) If the instructions for closure of deposit account and remittance to overseas are
    received by E-mail, branches should ensure authenticity of the message before
    acting upon such messages. If the branch is unable to verify the authenticity, they
    should insist on getting written instructions from the depositor so that they will be
    able to verify the signature, before acting upon the instructions.

    ii) Branches should not close the deposit account and repatriate the proceeds outside
    India without production of the original deposit receipt duly discharged by the
    depositor(s), particularly when the proceeds have to be remitted in the name of a
    third party i.e. other than the depositor (s).

    iii) In case the deposit is in the name of a minor, branches should verify if the minor
    has attained majority at the time of maturity / closure. If the minor has attained
    majority, the branch should insist for signature of the minor also on the deposit
    receipt along with the named guardian.

    iv) In case of remittance abroad, link branch should ensure to give full details of
    beneficiary’s name, address, bank’s name with Branch Account Number etc., to
    the designated branch to ensure prompt and proper remittance.
    v) Under any circumstances, the Power of Attorney holder should not be allowed to
    repatriate funds out of India, other than the pricipal.

    *********************************

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