This scheme has been introduced with effect from 15th June, 1992. The basic difference between the Foreign Currency (Ordinary-Non-repatriable) Scheme and this rupee deposit scheme is that this involves the placing of deposit in rupees rather than in foreign currency. It is intended to provided further incentive and give wider options to NRIs / OCBs. (Incidentally, the scheme is also open to foreign nationals of non-Indian origin and overseas corporate bodies controlled by them).

The accounts under this scheme may be opened in Indian rupees by authorised dealers out of the funds remitted to India in freely convertible foreign exchange from abroad; transfer of funds from existing NRE / FCNR accounts is also permissible and no penal interest shall be charged in respect of premature withdrawal of existing NRE / FCNR deposits for the purposes of making investment in the proposed scheme.

The maturity period can be fixed by the authorised dealers between 6 months and 3 years. The rate of interest can be fixed by the authorised dealers. The maturity proceeds and interest are non-repatriable.

The amount of the deposit can be gifted by individual account holders to a non-resident or to the account holders close relative in India or to any recognised charitable trust. The deposit will be exempt from gift tax for one time gifting and the income is also free of income tax; exemption from income tax however, is not available to resident donees / those who have inherited the deposit.

Authorised dealers may grant rupee loans / overdrafts in India to the deposit holders against the security of the said deposit for purpose other than investment. The margin and rate of interest for loans may be decided by the lending bank. Repayment of loan may, however, be allowed to be made either from NRE / FCNR / NRO Accounts or maturity proceeds of the deposit. The income-tax exemption has been granted by way of a notification dated 31st August, 1992.
 

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Investment in India