Operational Aspects of NRI Business | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE A: GENERAL BANKING OPERATIONS

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Banker-Operational Aspects of NRI Business

Banker-Operational Aspects of NRI Business

1. Permitted Accounts in India for NRIs and PIOs

Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) are permitted to open the following types of accounts in India:

  • Non-Resident External (NRE) Account: This account is used for transferring foreign earnings to India. It is fully repatriable, and the interest earned is exempt from Indian income tax.
  • Non-Resident Ordinary (NRO) Account: This account is used for managing income earned in India, such as rent, dividends, or pension. The interest earned is subject to tax in India.
  • Foreign Currency Non-Resident (FCNR) Account: This account is used to hold foreign currency deposits. It offers protection against exchange rate fluctuations.

2. Accounts in India of Foreign Nationals Visiting India

Foreign nationals visiting India for business or leisure purposes can open an FCRA (Foreign Currency Non-Resident Account), which is specifically meant for holding foreign currencies.

3. Special Non-Resident Rupee Account (SNRR Account)

The SNRR account allows non-residents to hold funds in Indian rupees for specific transactions, such as trade or investment. It can be used to convert foreign currencies into Indian rupees for transactions in India.

4. Remittance of Assets Held by NRIs/PIOs

NRIs and PIOs can remit their assets or income to their countries of residence, subject to regulations by the Reserve Bank of India (RBI) and tax laws. These remittances are typically facilitated through NRO/NRE accounts.

5. Acquisition and Transfer of Immovable Property in India by an NRI

NRIs can acquire immovable property in India, except for agricultural land, plantation property, or farmhouses. They can transfer such properties to other NRIs or Indian residents. However, they need to comply with legal procedures and pay applicable taxes.

6. Creation of Charge on Immovable Property in India

NRIs can create a charge (hypothecation or mortgage) on their immovable property in India to secure loans. The transaction must comply with the RBI’s guidelines.

7. Repatriation of Income and Sale Proceeds of Assets Held Abroad by NRIs

NRIs can repatriate income earned in India or sale proceeds of assets held in India to their country of residence, subject to certain conditions such as tax compliance and RBI approval.

8. Investments by NRIs/PIOs

NRIs and PIOs are allowed to invest in India under the following schemes:

  • Direct Investment: NRIs can invest in Indian companies through the Foreign Direct Investment (FDI) route, provided the company is in an eligible sector.
  • Stock Market Investment: NRIs can buy and sell shares, bonds, and other securities in India. They are subject to the same regulations as Indian residents.
  • Real Estate Investment: NRIs can invest in residential or commercial properties in India, excluding agricultural land.

MCQs

1. Which of the following accounts is meant for managing income earned in India by NRIs?

  • A) NRE Account
  • B) NRO Account
  • C) FCNR Account
  • D) SNRR Account

Answer: B) NRO Account

2. Can an NRI acquire agricultural land in India?

  • A) Yes
  • B) No, except for specific cases
  • C) Only if it is in a rural area
  • D) Yes, but only under a partnership

Answer: B) No, except for specific cases

3. Which account is specifically used to hold foreign currency deposits in India?

  • A) NRE Account
  • B) NRO Account
  • C) FCNR Account
  • D) SNRR Account

Answer: C) FCNR Account

4. Which of the following is true about SNRR accounts?

  • A) It can only hold Indian Rupees
  • B) It is used for foreign currency transactions only
  • C) It allows NRIs to convert foreign currency to Indian Rupees for transactions
  • D) It can only be opened by PIOs

Answer: C) It allows NRIs to convert foreign currency to Indian Rupees for transactions

5. Can NRIs transfer their property in India to other NRIs or Indian residents?

  • A) Yes
  • B) No
  • C) Only with government approval
  • D) Only to family members

Answer: A) Yes

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