1. Foreign Exchange Management Act
The Foreign Exchange Management Act(FEMA) was an act passed in the winter session of
Parliament in 1999 which replaced Foreign Exchange Regulation Act. This act seeks to make
offenses related to foreign exchange civil offenses. It extends to the whole of India.
FEMA, which replaced Foreign Exchange Regulation Act(FERA), had become the need of the
hour since FERA had become incompatible with the pro-liberalisation policies of the
Government of India. FEMA has brought a new management regime of Foreign Exchange
consistent with the emerging framework of the World Trade Organisation (WTO). It is another
matter that the enactment of FEMA also brought with it the Prevention of Money Laundering
Act 2002, which came into effect from 1 July 2005.
Unlike other laws where everything is permitted unless specifically prohibited, under this act
everything was prohibited unless specifically permitted. Hence the tenor and tone of the Act was
very drastic. It required imprisonment even for minor offences. Under FERA a person was
presumed guilty unless he proved himself innocent, whereas under other laws a person is
presumed innocent unless he is proven guilty.
Switch from FERA
The introduction of Foreign Exchange Regulation Act was done in 1974, a period when India’s
foreign exchange reserve position wasn’t at its best. A new control in place to improve this
position was the need of the hour. FERA did not succeed in restricting activities, especially the
expansion of TNCs (Transnational Corporations). The concessions made to FERA in 1991-1993
showed that FERA was on the verge of becoming redundant.[1]
After the amendment of FERA in
1993, it was decided that the act would become the FEMA. This was done in order to relax the
controls on foreign exchange in India, as a result of economic liberalization. FEMA served to
make transactions for external trade (exports and imports) easier – transactions involving current
account for external trade no longer required RBI’s permission. The deals in Foreign Exchange
were to be ‘managed’ instead of ‘regulated’. The switch to FEMA shows the change on the part
of the government in terms of foreign capital. [2]
Need for its management
The buying and selling of foreign currency and other debt instruments by businesses, individuals
and governments happens in the foreign exchange market. Apart from being very competitive,
this market is also the largest and most liquid market in the world as well as in India. [3]
. It
constantly undergoes changes and innovations, which can either be beneficial to a country or
expose them to greater risks. The management of foreign exchange market becomes necessary in
order to mitigate and avoid the risks. Central banks would work towards an orderly functioning
of the transactions which can also develop their foreign exchange market. [4]

2. Whether under FERA or FEMA’s control, the need for the management of foreign exchange is
important. It is necessary to keep adequate amount of foreign exchange reserves, especially when
India has to go in for imports of certain goods. By maintaining sufficient reserves, India’s
foreign exchange policy marked a shift from Import Substitution to Export Promotion. [5]
Main Features
- Activities such as payments made to any person outside India or receipts from them, along with
the deals in foreign exchange and foreign security is restricted. It is FEMA that gives the central
government the power to impose the restrictions.
- Restrictions are imposed on people living in India who carry out transactions in foreign
exchange, foreign security or who own or hold immovable property abroad.
- Without general or specific permission of the Reserve Bank of India, FEMA restricts the
transactions involving foreign exchange or foreign security and payments from outside the
country to India – the transactions should be made only through an authorised person.
- Deals in foreign exchange under the current account by an authorised person can be restricted
by the Central Government, based on public interest.
- Although selling or drawing of foreign exchange is done through an authorised person, the RBI
is empowered by this Act to subject the capital account transactions to a number of restrictions.
- People living in India will be permitted to carry out transactions in foreign exchange, foreign
security or to own or hold immovable property abroad if the currency, security or property was
owned or acquired when he/she was living outside India, or when it was inherited to him/her by
someone living outside India.
- Exporters are needed to furnish their export details to RBI. To ensure that the transactions are
carried out properly, RBI may ask the exporters to comply to its necessary requirements. [6]
NRI :
A Non-Resident Indian (NRI; Hindi: प्रवासी भारतीय Pravāsī BhāratīyaTamil:
வெளிநாட்டுொழ் இந்தியர் Velinattuvazh Indhiyar{{Bengali{ }} Probashi
Bharotiyo ) is an Indian citizen who has migrated to another country, a person of Indian origin
who is born outside India, or a person of Indian origin who resides permanently outside India.
Other terms with the same meaning are overseas Indian and expatriate Indian. In common
usage, this often includes Indian-born individuals (and also people of other nations with Indian
ancestry) who have taken the citizenship of other countries.

3. A Person of Indian Origin (PIO) is usually a person of Indian origin who is not a citizen of
India. For the purposes of issuing a PIO Card, the Indian government considers anyone of Indian
origin up to four generations removed to be a PIO.[2]
Spouses of people entitled to a PIO card in
their own right can also carry PIO cards. This latter category includes foreign spouses of Indian
nationals, regardless of ethnic origin. PIO Cards exempt holders from many restrictions applying
to foreign nationals, such as visa and work permit requirements, along with certain other
economic limitations.
The NRI and PIO population across the world is estimated at over 30 million. As per a UNDP's
2010 report, after China, India has the largest diaspora in the world, estimated at 25 million,
besides being one of the largest "sending" nations in Asia, with an emigration rate of 0.8%. out
of which, 72% work in other Asian countries. Also, as per UNESCO Institute for Statistics the
number of Indian students abroad tripled from 51,000 in 1999 to over 153,000 in 2007, making
India second after China among the world’s largest sending countries for tertiary students.[3]
Since 2003, the Pravasi Bharatiya Divas (Non-resident India Day) sponsored by Ministry of
Overseas Indian Affairs, is being celebrated on January 9 each year in India, to "mark the
contribution of Overseas Indian community in the development of India". The day commemorate
the arrival of Mahatama Gandhi in India from South Africa, and during three-day convention
held around the day, a forum for issues concerning the Indian Diaspora is held and the annual
Pravasi Bharatiya Samman Awards are given away.[4]
As of January 2006,[5]
The Indian
government has introduced the "Overseas Citizenship of India (OCI)" scheme to allow a limited
form of dual citizenship to Indians, NRIs and PIOs for the first time since independence in 1947.
The PIO Card scheme is expected to be phased out in coming years in favour of OCI.
History
It must be pointed out that strictly speaking "non-resident Indian" refers only to the tax status of
a person, i.e., someone who, under Income Tax Act of 1961 has not resided in India for the
purposes of the Income Tax Act (under Section 6), but is a citizen of India nonetheless.
Residence in India, for the purposes of the Indian Income Tax Act requires stay in India of at
least 182 days in a given calendar year or 365 days spread out over four consecutive years. This
requirement applies to all individuals, in that a person with non-Indian citizenship can also be
"resident in India" for the purposes of the Act, but a resident Indian would only be one who
meets the above requirement and possesses Indian citizenship. Likewise, anyone who is not a
resident of India according to the Act, is, obviously a non-resident of India, but only those who
possess Indian citizenship but do not meet the requirement of residence are treated as Non-
Resident Indians.
Different Types of NRI Bank Accounts
Introduction
In this article I will be writing about the different types of Non-Resident Indian(NRI) bank accounts
and services. It is the most common query which I receive from our readers. So, I planned to write
down one article explaining the details about the NRI bank accounts. I hope this article will be

4. useful for who want to open the NRI accounts. If you have any doubts please post it in the comments
section. Subscribe to our future articles here.
Types of NRI Bank accounts
There are many types of NRI banks accounts available. But, here I will be explaining only the most
widely used and offered by the leading banks in India. The following are the three types of NRI bank
accounts offered by most of the bank across India:
 NRE Savings/Fixed Deposit Account
 NRO Savings Fixed Deposit Account
 FCNR Fixed Deposit Account
In the following section I will look into the features and benefits of the each account in details. If I
miss out any thing, please post it in the comments section.
NRE Savings/Fixed Deposit Account
The Non Resident External (NRE) Savings Account is meant for Indians residing abroad. It allows
you to transfer foreign earnings easily to India.The following are the few important points regarding
the NRE account.
 NRE account can be opened as Savings and Fixed deposit accounts.
 There is no tax on interest earned from these accounts. Also there is no wealth tax.
 That the above tax exemptions are available only for an NRE Account held by an individual and
not for those maintained by OCBs (Overseas Company Bodies)
 The currency maintained in this account is Indian Rupee.
 Can open Joint account with any Non-Resident Indian. Cannot open Joint account with Indian
Resident .
 You can easily transfer money to India.
 Nomination is allowed in NRE Accounts.
 Can not deposit Indian Currency in to this account.
NRO Savings Fixed Deposit Account
The following are the key points on NRO account.
 NRO account can be opened as the Savings or Fixed Deposit account.
 Currency maintained in this account is Indian Rupee.
 Can open this account with any Indian Resident.
 Interest earned in this account is 30% taxable and surcharge and education cess will be
included. It is applicable for both savings and fixed deposit accounts.
 You can use this account to pay any bill and expenses in India.
 Enjoy the convenience of banking at any of our branches in India.
 Nomination is allowed in NRO Accounts.
 Can deposit Indian Currency in to this account.

5. FCNR Fixed Deposit Account
The following are the key points for Foreign Currency Non-Resident (FCNR) Fixed Deposit bank
account:
 Earn Indian Interest Rates on your Foreign Currency deposits with our Foreign Currency Non-
Resident Fixed Deposit.
 The entire deposit (principal and interest) is exempt from tax
 Open the deposit jointly with any other NRI
 Get an overdraft on your Savings / Current account against your FCNR Fixed Deposit
 Nomination Facility available
 Joint accounts with Indian Residents not allowed.
 Following currencies are allowed in this account:
o US Dollars
o Pounds Sterling
o Euro
o Japanese Yen
o Australian Dollars
o Canadian Dollars
 Can not deposit Indian Currency in this account.
 Minimum 1 year and maximum 5 years is allowed.
Summary
I hope this article will be more useful who are interested in opening the NRI bank accounts. If I have
missed out any of the important aspect of the topic, please post it in the comments section. I know
many of our readers are NRI and they already hold the NRI bank account. Please post your
experience and thoughts on the NRI accounts. Thank you for reading this article. Soon, I will coming
up with many NRI related articles. keep reading our articles.
What types of Bank accounts can an NRI open in India?
The various types of Bank Accounts an NRI can open are :
(i) Ordinary Non-Resident Rupee (NRO) Account :
NRIs can open NRO account for transactions in rupees without any approval. It can be maintained in the nature of current,
savings, recurring or fixed deposit account. NRIs may also open this account jointly with residents. After the person returns
to India permanently, this account can be again designated as a resident account.
(ii) Non Resident (External) Rupee Accounts (NRE A/C)
NRE account may be opened without any approval if the funds for this account are transferred in freely convertible foreign
currency. NRIs may jointly open this account with another NRI. This account can be maintained in the form of saving or
current or recurring or fixed deposit account. Balances held in this account and any interest earned on this account are
exempt from tax.
(iii) Foreign Currency (Non Resident) Account (FCNR A/C)
FCNR A/C is maintained only in term deposit.The account can be maintained only in

6. Pound Sterling, U.S. dollar, Deutsche Mark and Japanese Yen. The deposit is accepted for a period not below six months
and not above three years. Remittance from abroad is to be made in the foreign currency in which the account is desired to
be maintained. The balances and the interest on this account are exempt from tax .
(iv) Non Resident (Non Repatriable) Rupee Deposit Scheme -NR-NR-RD Scheme:
NRIs can invest through this scheme in term deposit maintained out of the funds transferred in India in freely convertible
foreign currency through proper banking channels.
This account is however, maintained in Indian rupees. The deposits can be for a period ranging from 6 months to 3 years.
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Are there any provision of repatriating the money held in the bank accounts in India ?
Yes, the balances lying in the following accounts can be repatriated anytime outside India:
(i) NRE account holders can not only repatriate the account held in this account but also the interest accrued on this
account.
(ii)Balances in NRO account can be remitted abroad with the permission of RBI. However, only the funds received from
abroad can be repatriated.It may be noted that normally this account is used for depositing the local funds/incomes of NRI.
(iii) The balances held in NR-NR-RD a/c cannot be repatriated abroad but the interest accrued on this account is permitted
to be repatriated.
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Can an NRI returning to India keep his money in Bank accounts abroad ?
A. Yes, NRIs returning from abroad after a continuos stay of at least one year can maintain their bank accounts abroad.
They can deposit all income earned abroad while they were resident there. Also any income earned on any asset
(immovable or not ) acquired while staying abroad can be deposited in this account. Moreover, any pension received by
such person from the erstwhile employers can also be deposited in this account.Any fresh credit to such account can be
made only if it is out of foreign currency acquired from the above mentioned sources.
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Can an NRI returning to India deposit his income earned outside India in the Bank ?
Yes, any NRI returning to India can deposit his income earned outside India in the Resident Foreign Currency Account (RFC
A/C), although if the NRI decides,he can retain his income outside India .
Under this scheme NRIs who were resident outside India for a continuous period of at least one year and have become
resident after returning back to India are permitted to maintain this account in any freely convertible foreign currency for
depositing his income earned outside India .(For details see relevant question above)
The following amounts can be deposited in the RFC A/C -
(i) Balances in Bank accounts outside India and interest thereon.
(ii) Dividend, interest, profit earned on investment in foreign currency in the form of shares or securities.
(iii) Rent etc. earned from Immovable property outside India.

7. (iv) Foreign exchange earning through employment , business or vocation outside India which was taken up while stay
abroad.
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Can NRI invest in shares and debentures of an Indian Companies?
YES, NRIs can invest in the new issue of shares and debentures of Indian companies. NRIs can subscribe to new issue of
equity/preference shares/debentures under different percentage schemes approved by RBI .As per the percentage scheme
the total percentage of issue to NRIs/OCBs should not exceed the specified limit .Different percentages are specified for
companies engaged in different areas :
(i) For Hospitals & Hotels - specified percentage is 40 %
(ii)For companies engaged in hire purchase, leasing etc. - the specified percentage is 24%.
(iii)For industries engaged in export trading activities,
Housing & Real Estate development and Air Taxi operation - the specified percentage is 100%
The amount invested and interest on that amount can be repatriated if the required conditions are fulfilled. Moreover, NRIs
can also purchase both old and new shares of sick industrial units for its revival. They can also purchase shares of Public
Sector Enterprise (PSE)
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Can NRIs invest in the Mutual funds schemes ?
Yes, NRIs/OCBs can invest in domestic mutual funds on repatriation basis. NRIs/OCBs can also invest in Mutual funds
floated by public and private sector mutual funds on non repatriation basis by giving a separate application in RBI . No
separate approval for the same is required .
Similarly, they can also invest in Money Market Mutual Funds (MMMFs) floated by commercial banks and other financial
institutions . No separate permission is required.
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Can an NRI place deposits with the companies ?
Yes, NRIs/OCBs can place funds in fixed deposits with public limited companies in India. If the permission to accept deposit
from non residents is already being taken by Indian company, it is not necessary for the investor to take separate
permission.
The investment can be done with full repatriation benefits for a period of three years.
Q 1. What is an EEFC Account and what are its benefits?
Ans. Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in foreign
currency with an Authorised Dealer i.e. a bank dealing in foreign exchange. It is a facility
provided to the foreign exchange earners, including exporters, to credit 100 per cent of their
foreign exchange earnings to the account, so that the account holders do not have to convert
foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs.

8. Q 2. Who can open an EEFC account?
Ans. All categories of foreign exchange earners, such as individuals, companies, etc. who are
resident in India, may open EEFC accounts.
Q 3. What are the different types of EEFC accounts? Can interest be paid on these
accounts?
Ans. An EEFC account can be held only in the form of a current account. No interest is payable
on EEFC accounts.
Q 4. How much of one’s foreign exchange earnings can be credited into an EEFC account?
Ans. One can credit up to 100 per cent of his/ her foreign exchange earnings into the EEFC
account, subject to permissible credits and debits.
Q 5. Whether EEFC Account can be opened by Special Economic Zone (SEZ) Units?
Ans. No, SEZ Units cannot open EEFC Accounts.
However, a unit located in a Special Economic Zone can open a Foreign Currency Account with
an authorised dealer in India subject to certain conditions. SEZ Developers can open EEFC
Accounts.
Q 6. Is there any Cheque facility available?
Ans. Yes; Cheque facility is available for operation of the EEFC account.