The NRO accounts held by the returning Indian shall be re-designated as resident accounts. The returning Indian should write to the bank for this purpose.

The NRE / FCNR account balances can be dealt with in the following two ways :

(a) conversion into resident rupee account; or

(b) transfer to RFC account

The interest on NRE / FCNR accounts, which are re-designated as resident account will continue to bear interest at the rate originally fixed for the full term.

Assets held in India

The RBI should be informed of the change in status from non-resident to resident. The returning Indian would have to write to each company in which he is holding shares, debentures, deposits, etc., to enable the companies concerned to make necessary amendments in their records. The RBI has clarified vide Letter, dated 26-9-1988 in response to a specific query that its permission is not required to record in the books of the company, the change in the address of the share / debenture holders when the non-resident becomes a resident. However, the RBI may only be informed about the change.

Foreign bank accounts

As stated above, the normal requirement was to close all bank accounts within a period of three months of return to India. The notifications stated above have drastically altered the situation as explained vide paras 2 and 3 of the circular dated 22nd September, 1992. The position is that persons returning to India after a continuous stay of one year and above have been granted general permission to maintain foreign currency accounts abroad, if such foreign exchange was acquired otherwise than in contravention of FERA, as also foreign exchange earned through employment, business or vocation, taken up / commenced while they were residing outside India (hereinafter referred to as "Eligible Assets"). If conditions of notifications are not satisfied (say, residence outside India is of less than one year), RBI should be approached for permission; exemption notification does not apply.

There is complete freedom of operation on such bank accounts. Incomes earned abroad can be freely credited to such bank accounts. Accordingly, balances held in such overseas account(s) need not be surrendered on return to India nor is there any need to declare the accounts or obtain permission of RBI for any operation. This is made clear by notification dated 7th September, 1992 issued under section 8(1).

Similarly, notification under section 9(1) of the same date removes restriction on making of payments including for securities or immovable properties, out of such accounts.

The notification refers to the same facilities being available in respect of foreign exchange held in India in accordance with an RBI approved scheme. Accordingly, RBI has notified a scheme called "Resident Foreign Currency Accounts Scheme" (RFC). Text of the same along with the account opening form appears as the last part of the circular dated 22nd September, 1992. The important features of the RFC account scheme are given below.

Resident foreign currency account

Scheme

Non-residents of Indian nationality / origin returning to India for permanent settlement, were entitled to foreign exchange under the Returning Indians Foreign Exchange Entitlement Scheme (RIFEES) Scheme. As stated above, RBI has introduced the RFC Account Scheme (in lieu of the RIFEE Scheme). The important features of the scheme are explained in succeeding paragraphs.

Opening of RFC accounts

Subject to the provision of the scheme, any eligible person may open and maintain, with an authorised dealer in India, one or more RFC accounts, expressed in any permitted currency. The application has to be made to the authorised dealer. The application form contains information relating to date of arrival in India and particulars of residence outside India; the relevant pages of the passport, duly attested, must be enclosed.

Credits to RFC accounts

Foreign exchange assets acquired or held by the returning Indian in terms of the various notifications stated above would generate income / sale proceeds. Such remittances as also funds in bank accounts abroad, can be credited to RFC accounts. The other credits include:

(i) Interest earned on RFC account.

(ii) Foreign currency notes / travellers cheque brought into India by the account holder.

(iii) Transfer from other RFC accounts of the account holder.

(iv) Balance in NRE / FCNR account standing to his credit at the time of arrival in India.

Operations

Funds in RFC accounts can be freely utilised for any bona fide remittances outside India. Withdrawals / payments from such accounts shall be permitted in equivalent Indian rupee for local payments. No loan / overdraft shall be permissible against balances in RFC accounts.

Other matters

The RFC account can be held singly or jointly in the name(s) of the eligible person(s). Addition of other names is not permissible. RFC accounts can be maintained in the form of current, savings or term deposit accounts.

The rate of interest on funds in RFC account shall be decided by the authorised dealer.

The interest earned on RFC account is exempt under section 10(15)(iv)(fa) of the Income-tax Act, 1961.

Transitional provisions have been made in respect of persons who had returned to India earlier to 18th April, 1992.

Balances held in NRE / FCNR account on the date of return to India can be converted into resident rupee account or such balances may be transferred to RFC accounts. NRE rupee account will be converted at the market exchange rate. The following cannot be transferred to RFC account :

(a) Balances held in NRE rupee accounts of persons resident in the bilateral group, which have been funded in non-convertible rupees.

(b) Balances in foreign currency (ordinary non-repatriable) deposit scheme.

The earlier RFC accounts scheme, vide notification dated 15th February, 1992, has been withdrawn.
 

Money Talk

Investment in India