by Moiz Mannan
Just as a sliding Indian rupee and the approaching festival season begin to induce non-resident Indians (NRIs) to remit more, the country’s apex bank has announced a slew of measures that would make it even more attractive send money home.
Already, the Reserve Bank of India (RBI) has hiked interest rates to an extent where investing in term deposits in India is far more lucrative than in most other countries. As a result of the latest rate hike by 25 basis points, the fixed deposit rates now being offered by public as well as private sector banks have gone as high as 10 per cent.
At the same time, the Indian rupee has come down to its lowest level in a long time, giving NRIs more value in exchange terms. NRIs in the Gulf, in particular, would want to benefit from the current situation as they are the one group of overseas Indians that sends money home regularly. Most Gulf NRIs have relatives or dependents back home which keeps them ever-involved with happenings in India.
In amendments announced to the Foreign Exchange Management Act (Fema) last week, the country’s central bank relaxed regulations to make it possible for NRIs to hold joint bank account with Indian residents. For the first time, RBI has also allowed resident Indians to repay loans availed of in rupees from banks in India by their close NRI relatives. Earlier, repayment of loans by close relatives in respect of Rupee loan availed by NRIs was restricted only to housing loans.
The meaning of “relative” in this case could be members of a Hindu undivided family; husband and wife, father, mother (including step-mother), son (including step-son), son’s wife, daughter (including step-daughter), father’s father, father’s mother, mother’s mother, mother’s father, son’s son, son’s son’s wife, son’s daughter, son’s daughter’s husband, daughter’s husband,
daughter’s son, daughter’s son’s wife, daughter’s daughter, daughter’s daughter’s husband, brother (including step-brother), brother’s wife, sister (including step sister) and sister’s husband.
According to the RBI circular, such loans (even other than housing loans) may be repaid by resident close relative of the NRI by crediting the borrower’s loan account through the bank account of the relative.
The Reserve Bank of India had, in the Annual Monetary Policy for 2011-12, announced setting up of a Committee to identify areas for streamlining and simplifying the procedures under Fema, so as to remove the operational impediments and assess the level of efficiency in the functioning of authorised persons, including the infrastructure created by them. The Committee submitted its report in early August 2011.
As per the amendments recommended by the committee, individual residents in India are now permitted to include non-resident close relatives as joint holders in their resident bank accounts, namely, savings (SB), Export Earners’ Foreign Currency (EEFC) and Residents’ Foreign Currency (RFC) accounts. NRIs/ PIOs are now also permitted to open Non-Resident (External) (NRE) Rupee Account Scheme/Foreign Currency (Non-Resident) (FCNR) Account (Banks) Scheme with their resident close relatives as joint holders. Further, a person resident in India can now give to a person resident outside India, by way of gift, any security/shares/debentures of value upto $ 50,000 in value per financial year subject to certain conditions. Earlier, this was restricted to a value of up to $ 25,000 per calendar year.
The sale proceeds of Foreign Direct Investment (FDI) can now be credited to Non-Resident (External) Rupee (NRE) Account Scheme/Foreign Currency (Non-Resident) Account FCNR (Banks) Scheme provided the original acquisition was by way of inward remittance or funds held in their NRE/FCNR (B) accounts.
Resident individuals are now permitted to make rupee gifts within the overall limit of $ 200,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) to an NRI/PIO who is a close relative by way of crossed cheque/electronic transfer to the Non-Resident (Ordinary) Rupee Account (NRO) of the NRI/PIO.
Similarly, resident individuals are now permitted to lend in Rupees within the overall limit under the Liberalised Remittance Scheme of $ 200,000 per financial year to an NRI/ PIO close relative by way of crossed cheque/electronic transfer, subject to certain conditions.
Residents will now be allowed to bear the medical expenses of visiting NRIs/PIO close relatives. Earlier, residents were allowed to make payment in rupees towards meeting expenses on account of boarding, lodging and services related to it or travel to and from and within India of a person resident outside India and who is on a visit to India.
The Peninsu
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