Short NRI’s Guide to Banking , Insurance & Investments

POSTED BY Jagoinvestor ON June 18, 2010 COMMENTS (69)

There are a huge number of Indians who are working abroad or will go abroad one day and work there. Even you might go out of the country one day and become an NRI, so here’s a very short, to the point guide for NRI investments.

Today we discuss the most important NRI investment options and we’ll focus on four things – Basic Banking Accounts, Insurance, Mutual Funds, and Shares. That’s all.  The rules and information here are basic, but further study can be very detailed. Let’s quickly look at some important concepts every person should know. Even if you are not an NRI, you can at least advice your other friends 🙂 The first step every NRI should take, is to get the correct Banking accounts opened. Here are the options:

What is an NRE account?

NRE bank account is an external savings bank account opened for Non-resident Indians and hence called Non-Resident External account. Any money lying in the NRE account can be taken outside the country or in other words, the money lying in an NRE account is fully repatriable. This money can be converted into any foreign currency and can be remitted outside the country. For opening these accounts, the funds are required to be remitted to India through any bank from the country of residence of the prospective account holder. The accounts may be maintained in any form e.g. savings, current, recurring or fixed deposit account, etc. (How to find best Fixed Deposits in India)

What is an NRO account?

NRO bank account is an ordinary saving bank account opened for Non-resident Indians. This is why it is known as the Non-Resident Ordinary account. You open an NRO account when you want to transfer money from your overseas bank account to an Indian account in Indian Rupees. The money lying in the NRO account cannot be taken outside the country or in other words, the money lying in the NRO account isn’t repatriable. This is can be in form of Fixed Deposit accounts also (compare rates)

What is an FCNR account?

A FCNR account is a Fixed Deposit account with maturities of minimum 1 yr to maximum 5 yrs of tenure. FCNR stands for Foreign Currency Non-Resident (Bank) Account. The money in this account is always maintained in foreign currency, so it does not carry a currency risk (your $10,000 is always worth $10,000). The money lying in a FCNR account can be taken outside the country (or in other words, it is repatriable.)  Deposits in these accounts can be made by remitting funds from abroad.

Comparison of Table

Account type
Saving , Current or
Fixed Deposits account
Saving , Current or
Fixed Deposits account
  Fixed Deposit
Money maintained in which currency Rupees
Any of U.S. Dollar, Pound Sterling, Euro, Australian Dollar, Canadian Dollar
 (can money be taken outside the country)
Money can be
Deposited from
From Abroad through Bank account
India or Abroad
From Abroad through Bank account
Joint Account with Indian Residents
Suitable for
NRI’s whose income source is only from abroad NRI’s how have income source from both India as well as Abroad
NRI’s who dont want to want to take currency risk


Can NRI take Insurance?

Yes, NRIs can buy Insurance in India; however they have to be present in India, while taking the Insurance. They should, therefore, plan for buying the insurance when they are on a trip to India. One important point, is that the premiums should be paid from NRE account, if the maturity value is to be repatriable, else only the partial amount will be repatriable,(for which premiums were paid from NRE account.) One has to make sure, they have all the necessary documents in place before they come to buy insurance.

Documents are

  • PAN Card
  • Income Address proof
  • Overseas Proof of Address
  • Proof of Income  (Salary slip, Bank Statement or ITR for last 3 yrs)
  • you will also have to fill a separate form called NRI Questionnaire-Annexure II

NRI investment in  Shares ?

Steps required by NRI’s to start trading in Stock Markets

  1. Apply for a PAN card (you can do it online.) You will get it within a week.
  2. Open an NRE/NRO account. You will require this account to fund money for your stock market transactions. Make sure you choose the account carefully, depending on your requirement (Repatriable/Non-Repatriable basis etc.)
  3. Apply for a general approval for investment in Indian Stock Market through it’s designated bank branch, this is called PIS (Portfolio Investment Scheme) (PIS rules  in detail)
  4. Once you have a PAN card, you’ll have to open a Demat account with any bank or a brokerage firm – you will require this for trading.
  5. Finally, you need to have an online stock market trading account for investing in the stock market directly. Generally, you can get a combo Trading + Demat account at the same place.

Note that NRI’s are not allowed to do intra-day trading (can’t buy and sell on the same day)

NRI investment in Mutual Funds

NRIs can invest in all Indian mutual funds, except in funds promoted by Asset Management Companies based in the U.S. (Fidelity, Franklin Templeton and HSBC.) The payment can be made from any of the NRE/NRO/FCNR accounts. If they make payments from NRE/FCNR account, then it can be on a repatriable basis (They can take the profit and principal out of the country.) But, if they make payment from NRO account then it will be on non-repatriable basis. However, the dividends can be on repatriated. No prior or extra permission needs to be taken from RBI for this. This is allowed by default. There is no tax on dividend income, and long-term capital gains tax is zero in India when investing in Indian equity mutual funds.

69 replies on this article “Short NRI’s Guide to Banking , Insurance & Investments”

  1. jimmyjose2980 says:

    Hi Manish,

    1. Online Trading
    After moving out of India, I have not yet traded shares online (through ICICI Direct). As stated by you, one will require an NRE/NRO A/c to fund money for stock market transactions.

    I have an NRE A/c with BOI. Since I have not converted my ICICI SB A/c to an NRE A/c, can I still trade shares using ICICI Direct? These will only be long-term trading and not intra-day.

    2. Insurance
    The article states that the premiums should be paid from an NRE account, if the maturity value is to be repatriable. All insurances were bought before becoming an NRI.

    A]. Does this rule have any bearing on future payable premiums as payments are either made online through SB A/c or through ‘Standing Instructions’?
    B]. Does it affect the total maturity value if instructed to be credited in an SB A/c?



    1. 1. As per rules, I guess you should not do it , but people still do it as its ONLINE thing .. Choice is yours

      2. Hmm .. I am not very clear on this ..

      1. jimmyjose2980 says:

        Thanks Manish!

  2. jains says:

    Couple of updates that are needed for this very informative article due to regulatory changes since original posting
    a) NRIs based in US & Canada are restricted from investing in most of the mutual fund AMCs. e.g. ICICI/HDFC/DSP/Reliance can’t be invested in. I don’t know what remains but definitely its a very limited option
    b) NRE was the only option to repatriate money abroad but not even NRO accounts are permitted upto $1M transfer annually provided a CA certifies that all indian taxes have been paid. Given that, its lot more convenient to continues investments in INR and do a repatriation once in a while. (the limits & frequency would work for most cases)
    c) for US specifically has long term capital gains of 15% even on stocks, while Indian taxation has NIL taxes. So its critical that you clean out all your long term stock holdings prior to becoming NRI when US regulations would start taxing all global income (where tax equal to US regulations i.e. 15% must be paid in India, failing which it needs to be paid in US)
    d) as per regulations banking accounts should be converted to NRO even before traveling abroad, however person becomes “NRI” only after 6 months. its not clear what is done with existing residence demat account holdings, fixed deposits etc in this interim period of 6 months?

    1. Thanks for mentioning those points , I know I have to updates these now .. will do that very soon

  3. Shaahul Hameed says:

    Hi Manish,

    If NRE account is used to invest in Mutual Funds or shares, can we use the same NRE account to receive dividends from our investment.


    1. Yes, anyways the dividends will come to same account

  4. DB DESAI says:

    NRIs major investment interest is real estate including agricultural land, residential properties, commercial properties, shops, offices, open plots, orchids etc. I hope you will please include this area in NRI investments and explain about eligibility, regulations, permissions, documentation, taxation, accounting, exchange rules and other issues related to real estate investments.

    1. That will now be in seperate article

  5. Mridul says:

    Hi Manish,

    Hope you are doing well.

    I have 2 question for you.

    My 1st question is if some one send foreign money from abroad to his/her normal savings account in India then will it be consider it income (the account holder of savings account holder).I mean whether he/she is liable to pay income tax on that?

    As an example if he/she sends 5oooUSD in a financial year then whether the equivalent INR will be consider his/her income in India & he/she need to show this in his/her IT return or not?

    Or only interest portion of the equivalent INR of 5000USD will be consider as income & he/she liable to show that interest only in his/her IT return?

    My 2nd question is;
    If it is a NRO account & the interest earned in NRO account is liable to to 30% tax on that interest amount?Am I correct.?


    1. Mridul

      If the money sent is on repatriable basis then there is no income tax .

      1. Mridul says:

        Thx Manish.
        Can you pls answer my 2nd question?


  6. Anant says:

    Hi Manish,
    Your website is really informative and what i like about it is its in simple language and easily understood! Keep up the good work.
    What i would like to ask you is:
    My wife is with OCI card as she holds foreign passport. Im with Indian passport. After marriage my wife has shifted here to India with me and working here with me in our institution for around 6 months. I would like to know is whether she can apply for Health insurance in India? Also she only holds NRO account as now she gets her pay from here in INR.
    Kindly enlighten me regarding this.

    1. Anant

      This will depend on the company providing health cover, it is upto their rules, have you tried with some company till now or not ?

  7. Kiran says:

    I’m a US based NRI. I see that Indian banks are offering NRE FD 9.5% (Interest Cumulative quartely) for 10 years. Is it a good idea to invest in NRE FD or Mutual Funds or Stocks? In case of NRE FD the ROI is fixed and guaranteed but not the case in mutual funds and stocks. What do you suggest?

    1. Kiran

      If you are fine with 9.5% , then go ahead .. its totally dependent on what you beleive can happen in future and want to take risk for it . I personally feel , mutual funds should be good enough .


    2. Hi Kiran
      While a 9.5% does seem attractive but i would suggest that you need to factor in the inflation for the relevant period. A 10 year is a pretty decent time horizon and you should consider a diversified equity mutual fund for this horizon. Your real rate of return(returns adjusted for inflation) would be far higher in mutual funds than an FD.
      Prashant Rathi

  8. Sapan says:

    how can i start investing in MF through NRE.. no information of how to invest in MF or do I need some1 from India to do on my behalf?? or I can operate from here only..


    1. Sapan

      You can invest through NRE account, but the final amount you earn and maturity proceeds will be repatriable 🙂 . No complexity in this .


  9. Jeffrey says:

    it would be good to give some information on what kind of accounts can foreigners have in India–specifically those who hold an OCI card (Overseas Citizenship of India). I guess they are treated like NRIs?

    1. Jeffrey

      I dont have much idea on that , can you ask on , You might get some info from there


  10. Suresh says:

    I took the term insurance already 2 years back. but in coming jan i will move to USA for work assignment. Do i need to take any action steps regarding the insurance policies i have.

    1. Suresh

      If you are going for a long period, better inform your insurance company about your moving to US


      1. Suresh says:

        Thanks Manish.
        and i have one more question, i have few inestments in mutual funds.
        and i don’t want to sell them now but i am moving to US for longer period. After some time if i want to sell them, can i sell them as NRI and how capital gains calculated?

        1. Suresh

          You can operate your old mutual funds buying and selling just like Indian from your demat account in india


          1. S.Navaneethan says:

            Hi Manish,

            I have worked in Kuwait for 3 months and return back to India. Is that I have earned money is Taxable in India.

            Somebody saying I will be out of India 182 days why should i go out of India for 182 days?

            Please clarify my doubt

            1. Yes, it will be taxable in India if you have brought that money back in India

  11. Darshil Desai says:

    Regarding NRI PIS account can anyone tell whether it is necessary to have PIS account and NRE account with same bank branch ?

    1. Darshil

      No , Its not mandatory . The banks Authorised to accept PIS applications are HDFC, UTI, ICICI Bank

      If you have NRE account in these banks you can open the PIS account in the same bank if you wish


  12. iciciSucks says:

    So, let’s say I have an NRE a/c and uses funds from it to buy equities. After 1.5 years, I see the equities for a profit of Rs. 90,000.

    Can the profit be deposited back into the NRE a/c?

  13. iciciSucks says:

    Is the deposit rate fixed for NRE a/c?

    Is there a way to earn higher interest in an NRE a/c?

    1. I dont think so 🙂


  14. Gr8 post! Highly appreciate your writing skills. A very extensive piece of information is being shared in the above post. A must read for every NRI, who wishes to invest there money somehow.

    1. Thanks for your apprecitation , what other information do you think should should be present here ?


  15. yogesh says:

    So for this Do I need to open FCNR account too Or having NRE account is enough to open the FD.

    1. You can open NRE for FD , however FCNR is just for FD


  16. yogesh says:

    Hi Manish ,

    Good Article.

    In NRE account ,Is there any restriction on total sum of amount that can be kept ? Or can keep any sum of amount ?

    Is doing FD benefitical in NRE account ? How much is the interest ? Any one had done this thing?


    1. Yogesh

      There is no restriction in NRE account , you can open an FD in FCNR account .


  17. yogesh says:

    Hi Manish ,

    Good Article.

    In NRE account is there any restriction also on total sum of balance.


    1. Yogesh

      No . there is no limit for NRE account , however there is a limit of $1 million for NRO account .


  18. Vidhya says:

    If I want to sell my property in India and expatriate the money, what are the options?

    1. Vidhya

      This can get complicated , will depend on when you bought it and all . Better consult with CA .


  19. Ash says:

    Nice & brief article….Keep it coming and continue the good work!

    1. Ash

      Thanks , Are you an NRI ? Can you add more info in this ?


  20. NRI, NRO & FCNR के बारे में बहुत ही अच्छी जानकारी।

    1. Thanks Vivek


  21. Srinivas says:


    Very good piece of information. Keep it up.
    However, the title Should be “NRI’s short guide to …..” instead of “Short NRI’s…….” 🙂

    1. Srinivas

      Thanks . I wanted to make sure the first word is “Short” , so that readers dont run away listening to “Guide” word 🙂


      1. Vivek says:

        Hi Manish,

        AFAIK, NRIs/PIOs in the US cannot open demat accounts or trade directly in the indian secondary market for equities . This is due to regulations by US SEC and not due to indian regulation .

        Thanks .

        — Vivek

        1. I didnt knew that . Thanks for the info 🙂


  22. Sreekumar Menon says:

    Nice Article as always.

    Are there any special rules/restrictions for NRI’s in USA for trading in indian stock market.


    1. Sreekumar

      Though I am not sure , however as far as I know , I dont think there is any restrictions per se.


  23. Jeffrey says:

    Terse and to the point. A very good article. I have been following this blog for a few weeks now and your articles are very good, no jargon and easy to follow. Keep up the good work!

    1. Jeffrey

      Thanks for comment 🙂 Keep in touch


  24. Anunay says:

    Complete info given in a easy to understand and simple language.
    I guess NRE account cant be opened jointly with resident indian and NRO account can be opened jointly with resident indian. Also cash in FCY can be deposited in NRE account upto the limit of 25000 USD per visit. Please check, I may be wrong

    1. @ Anunay

      You are right “NRE account cant be opened jointly with resident indian and NRO account can be opened jointly with resident indian”.

      But I don’t think there is any limit of Rs 25000 at the time of deposition.

      1. Hemant/Anunay

        yea .. there is no limit for NRE account , however there is a limit of $1 million for NRO account .


      2. Anunay says:

        Hi, the limit i mentioned is USD 25000or equivalent cash deposit per visit in NRE account. However there is no limit for deposit in NRE account through foreign remittance or cheque issued from other NRE account.

    2. Anunay

      oops .. My bad . I have corrected the mistake . Thanks for pointing out .


  25. Abhishek says:

    Thanks hemant, Does this link mean that NRIs cannot invest in these 12 MFs ?

    1. Abhishek

      Yes , i think so , mutual funds which are not pure Indian mutual funds have restrictions like those .


    2. @ Abhishek

      Above list is having 2 Columns AMC & Restricted Country.

      In case of FIDELITY: NRIs staying in US & Canada cannot invest but NRIs who are staying in other part of the world can invest.

      In case of FRANKLIN: Restriction is only limited US based NRIs.

      Hope it clarifies.

      1. Hemant

        The concerned person can always have money invested in these funds through his contacts in India . Its one of the workarounds . correct ?


        1. That way –

          India is country of all possibilities. 🙂

  26. @ Manish

    Article is very crisp.

    “NRIs can invest in all Indian mutual funds, except in funds promoted by Asset Management Companies based in the U.S. ” This rule is different for every foreign AMC. I will share complete details for the benefit of all readers.

    1. List of Restricted Countries(AMC) for NRI Investments – Mutual Funds

      Hope readers find it useful.

      1. Thanks Hemant

        Can you confirm if one can not invest in these AMC mutual funds if they are NRI ?


        1. @ Manish

          Max. restrictions are for USA & Canada based NRIs.

          ING is the only AMC which places restriction other than USA & Canada.

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