NRE accounts can be opened by non-resident Indians and persons of Indian origin to hold funds in Indian rupees. These accounts allow savings, current, recurring or fixed deposits. Funds in NRE accounts can be used for local expenses and investments in India, and can be credited with remittances from abroad. Interest earned is tax exempt. Loans can be taken against NRE account balances for personal or business use in India. If the account holder becomes a resident of India, the account must be converted to a resident account.

1. Non-Resident (External) Account - NRE Account
Eligibility -
Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can open and
maintain NRE accounts with authorized dealers and with banks (including co-
operative banks) authorized by the Reserve Bank of India (RBI) to maintain such
accounts.
The account has to be opened by the Non Resident account holder himself and not by
the holder of the power of attorney in India.
Opening NRE accounts in the names of individuals/entities of Bangladesh/Pakistan
nationality/ownership requires approval of RBI
Types of Accounts-
Savings, Current, Recurring or Fixed Deposit accounts.
Debits & Credits-
Payments for local expenses and investments are allowed freely. Credits to an
account, of funds emanating from a local source would be permissible only if the
funds are of a repatriable nature.
Permitted Credits
 Proceeds of remittances to India can be in any permitted currency.
 Proceeds of personal cheques drawn by the account holder on his foreign
currency account and of travellers cheques, bank drafts payable in any
permitted currency including instruments expressed in Indian rupees for which
reimbursement will be received in foreign currency, deposited by the account
holder in person during his temporary visit to India, provided the authorised
dealer/bank is satisfied that the account holder is still resident outside India,
the travellers' cheques/drafts are standing/endorsed in the name of the
account holder and in the case of travellers' cheques, they were issued outside
India.
 Proceeds of foreign currency/bank notes tendered by account holder during his
temporary visit to India, provided
(i) the amount was declared on a Currency Declaration Form (CDF), where
applicable, and
(ii) the notes are tendered to the authorised dealer in person by the account
holder himself and the authorised dealer is satisfied that account holder is a
person resident outside India.

2. Permitted Debits
 Local disbursements
 Remittances outside India
 Transfer to NRE/FCNR accounts of the account holder or any other person
eligible to maintain such account.
 Investment in shares/securities/commercial paper of an Indian company or for
purchase of immovable property in India within prescribed regulations.
 Any other transaction if covered under general or special permission granted by
the Reserve Bank.
Rate of Interest - as per the directives of the Reserve Bank of India.
Loans against Security of Funds held in the Account
To the account holder:
i) For personal purposes or for carrying on business activities (except
agricultural/plantation activities/investment in real estate business).
ii) For making direct investment in India on non-repatriation basis.
iii) For acquisition of flat/house in India for his own residential use.
In January 2007, the RBI imposed a restriction on loans against deposits and securities
for NRIs to a maximum of upto Rs. 20 lakh
To third parties: The loan should be utilised for personal purposes or for carrying on
business activities (other than agricultural/plantation activities/real estate business).
The loan should not be utilized for re-lending.
Loans outside India: Authorised dealers may allow their overseas
branches/correspondents to grant fund based and/or non-fund based facilities to Non
Resident depositors against the security of funds held in the NRE accounts and also
agree to remittance of funds from India if necessary, for liquidation of debts.
Change of Resident Status of Account Holder:
NRE Accounts should be re designated as resident account or the funds held in these
accounts may be transferred to the Resident Foreign Currency (RFC) Accounts (if the
account holder is eligible for maintaining RFC Account) at the option of the account
holder immediately upon the return of the account holder to India (except where the
account holder is on a short visit to India).
Repatriation of funds to Non Resident Nominee can be permitted by the authorized
dealer or bank in the case of an account holder who is deceased.
Other Features -

3. Joint Accounts – Joint Accounts in the names of two or more Non Resident individuals
may be opened provided all the account holders are persons of Indian nationality or
origin.
When one of the joint holder become residents, the authorised dealer may either
delete his name or allow the account to continue as NRE account or redesignate the
account as resident account at the option of the account holders. Opening of these
accounts by a Non Resident jointly with a resident is not permissible.
 An Account may be opened in the name of eligible NRI during his temporary
visit to India.
 Operation by Power of Attorney - Resident Power of Attorney holder can
operate on the NRE accounts but only for local payments to be made on behalf
of the account holder. The Power of Attorney (POA) holder cannot credit
proceeds of foreign currency notes/bank notes and travellers cheques to the
NRE accounts.
In cases where the account holder or a bank designated by him has been granted
permission by Reserve Bank to make investments in India, the POA holder is permitted
to operate the account to facilitate such investments. POA holders cannot, however,
make gifts from NRE accounts.
Special Series of Cheques -
 Temporary Overdrawing - permitted from NRE Savings Bank account up to Rs.
50,000 for a period not exceeding two weeks.
 Remittances abroad by Resident nominee - application for meeting the
liabilities if any of the deceased account holder or similar other purposes,
should be forwarded to RBI for consideration.
 Tax Exemption - Interest income exempted from income tax, balances held are
also exempt from wealth tax.
 Reporting - Transactions to be reported to the Reserve Bank of India.
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