General Information
The regulations relating to the opening of an operation of Ordinary Non-Resident Accounts (NRO) are contained in Chapter 28 of the ECM. These regulations have been substantially liberalised vide RBI’s AD (MA) Circular No. 7, dated 30th March, 1993. Accordingly, the comments below are after incorporating the liberalised measures as contained in that circular.
 

Major changes

The following important changes have been brought about by Circular No. of 30th March, 1993.

1. NRO Accounts were earlier permitted to be opened by authorised dealers only for NRIs / OCBs. As per para 28C.1 of the ECM, the NRO account in the name of other non-residents were to be referred to the RBI. The amendment is that, now the accounts may be opened in the name of all non-resident individuals / entities without RBI approval, for the purpose of putting through bona fide transactions within the parameters of FERA, 1973.

2. Joint accounts with close relatives were permitted. The amendment is that now the NRO accounts can be held jointly with residents (there is no requirement that the resident must be a close relative).

3. Earlier, opening of NRO accounts in the names of Pakistan or Bangladesh nationals required prior approval. Now, Chinese nationals have been added to this list.

4. The operations on NRO accounts were spelt out in the form of a long list of debits and credits. The list of credits has been substantially compressed by providing now for two credits i.e. foreign remittance and legitimate dues of the account holder in India. Similarly, the list of debits has been deleted and now consists of only one item namely, debit for all local payments in rupees. In other words, even the few restrictions of debits have now been removed.

5. Granting of loans and overdrafts which was earlier subject to a cap of Rs. 5 lakhs (and that too in respect of NRIs and for purposes other than investment), has been substantially liberalised by specifying that such loans to non-resident account holders may be granted on the security of fixed deposits held by them subject to usual norms applicable to residents.

Redesignation

When a resident Indian becomes an NRI, his bank account, if any, in India is designated as an NRO account. Of course, such accounts can also be opened inter alia, with funds remitted from abroad or local source funds which are eligible for credit to NRO accounts. The accounts should be maintained in the form of savings or current or term deposit account. An OCB can also oepn an NRO account.
 

Joint holdings

NRO accounts can also be opened jointly by non-residents with any resident in India and operations thereon by the resident account holders can be made freely.
 

Non-repatriability

Funds in this account are not repatriable and cannot be remitted abroad to the account holders or transferred to their NRE / FCNR account without the RBI’s prior permission. Such permission would be granted only in exceptional circumstances, such as where funds derived by foreign remittance have not lost their identity as remittable funds.
 

Permitted debits

Withdrawals from these accounts can be freely made for all local payments.

The following are permitted credits:

(i) Foreign remittances;

(ii) Proceeds of permitted currency tendered during visit to India;

(iii) Transfers from rupee accounts of non-resident banks situated in External Group;

(iv) Legitimate dues in rupees of account holder in India.
 

Operations

The account can be jointly held with resident individuals. Operations of such accounts by the resident joint holder would be allowed freely. A resident can obtain power of attorney for operating a non-resident account for the limited purpose of withdrawals for local distbursements. Power of Attorney can be executed outside India. However, for making it enforceable in India, it must be stamped in India. Under such circumstances, after executing power of attorney, it must be stamped in India within one month of bringing it into India.
 
 
 
 

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