DEPOSIT SCHEMES FOR NON-RESIDENT INDIANS (NRIs) : August 18, 2008 1 DEPOSIT SCHEMES FOR NON-RESIDENT INDIANS (NRIs) WELCOME
TO THE SESSION
ABOUT THE TRAINER : August 18, 2008 2 ABOUT THE TRAINER Bhushan Bhatia -an Eminent Banker and reputed trainer with a nationalized bank in India.
Qualifications: MBA(HR), MA (Eng), LLB(Prof), CAIIB, PGDCA and holds Diplomas in Bank Management, Industrial Relations.
Undergone Trainings: IMPACT- Train the Trainers by University of Auckland, Six-Sigma by National Productivity Council.
Experience: More than 24 years experience as a Banker and Trainer.
Core areas of working are HR, Training, Credit, Forex and CBS.
Current Position: Working as a Senior Faculty in the Regional Staff College of a Nationalized bank in India.
Foreign Exchange : August 18, 2008 3 Foreign Exchange “Foreign Exchange” is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example US Dollar/Indian National Rupee (USD/INR) or US Dollar/Euro (USD/Euro). The Foreign Exchange market, also referred to as the “Forex” or “FX” market is the largest financial market in the world, with a daily average turnover of over US$1 trillion.
Forex Quotes : August 18, 2008 4 Forex Quotes The US dollar is the centerpiece of the Forex market and is normally considered the ‘base’ currency for quotes. Quotes are expressed as a unit of $1 USD per the second currency quoted in the pair. For example, a quote of USD/INR 40.50 means that one U.S. dollar is equal to 40.50 Indian National Rupee. When the U.S. dollar is the base unit and a currency quote goes up, it means the dollar has appreciated in value and the other currency has weakened. If the USD/INR quote we previously mentioned increases to 41.00, the dollar is stronger because it will now buy more rupee than before. In other words, if a currency quote goes higher, that increases the value of the base currency. A lower quote means the base currency is weakening.
Forex Quotes : August 18, 2008 5 Forex Quotes Currency pairs that do not involve the U.S. dollar are called cross currencies, but the premise is the same. For example, a quote of EUR/JPY 127.75 signifies that one Euro is equal to 127.75 Japanese yen
Direct quote – Foreign currency constant, home currency varies.eg. USD 1 = Rs. 40.50
Indirect Quote- Home currency constant, foreign currency varies. Eg. Rs. 100 = USD 2.53.
Terms Used in Forex Transactions : August 18, 2008 6 Terms Used in Forex Transactions Cash /TOM/ SPOT – date on which the exchange of currencies actually take place.
Forward Transaction – Beyond Spot date
Value date – Date of actual Credit
Derivatives : August 18, 2008 7 Derivatives Financial contract whose value is derived from or depends on the price of some underlying asset. Value of derivative changes when there is a change in the price of the underlying related asset.
Forwards, Futures, Options, Swaps
Derivatives – Forwards & Futures : August 18, 2008 8 Derivatives – Forwards & Futures Forward – to buy a specified asset on a specified date at a specified price.
Both right and obligation.
Future Contract – similar to forward contract.
Currency futures contract: A contract traded on a recognized stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the date of contract, but does not include a forward contract."
Derivatives-Option : August 18, 2008 9 Derivatives-Option Gives the buyers right but no obligation to buy or sell the underlying at the agreed rate on or before an agreed date,
American style options – on or before the expiration date
European Style options – only on the expiration date
A simple derivative with standard features is termed as a plain vanilla.
Derivatives -Swaps : August 18, 2008 10 Derivatives -Swaps Contractual agreements between two parties to exchange flows -very common and popular product in derivative markets.
IRS – No exchange of principal but periodic exchange of streams of interest payments in terms of predetermined terms on a notional agreed principal.
Currency Swap – two parties agree to exchange specific amounts of two different currencies in the beginning and make periodic payments over time in accordance with predetermined terms.
Correspondent Bank : August 18, 2008 11 Correspondent Bank Correspondent Bank – The interbank market is a network of correspondent banking relationships with large commercial banks maintaining demand deposits account with one another, called correspondent banking accounts. The correspondent bank account network allows for the efficient functioniong of the foreign exchange market
Role of RBI : August 18, 2008 12 Role of RBI It is empowered under the statute to control and regulate
foreign exchange reserves and policies related to international trade,
Inflow/outflow of foreign exchange,
It also has supervisory powers over the persons authorized to deal in foreign exchange.
Role of RBI : August 18, 2008 13 Role of RBI To maintain the stability of the external value of the domestic currency corresponding to the economic strength of the country and the monetary and fiscal policies of the authorities concerned.
The guidelines and directions by RBI, so issued relate to foreign exchange transactions relating to exports, imports, remittances, travel and tourism, investments in India, repatriation of funds, non-resident Indian segment, as also overseas investment by Indian residents.
FEMA 1999 : August 18, 2008 14 FEMA 1999 All transactions in Foreign exchange are governed by FEMA 1999.
FEMA replaced FERA,1976.
Important Provisions of FEMA related to exports, imports, exchange rates, currency of payments, NRIs, etc…
Provisions for Foreign Travel.
Other Remittances.
Foreign Currency A/C in India
Exchange Earners Foreign Currency (EEFC) A/Cs
Resident Foreign Currency (RFC) Accounts
Resident Foreign Currency (Domestic
Who is an NRI : August 18, 2008 15 Who is an NRI An NRI is a person resident outside India who is a citizen of India or is a person of Indian origin. Under the Foreign Exchange Management Act (FEMA), generally, a person is resident outside India if he is in India for less than 182 days during the course of the preceding financial year and also includes any person who stays abroad:
for employment, or
for carrying on any business or vocation, or
for any other purpose indicating an intention of stay outside India for an uncertain period
for education - provided the student has stayed overseas for more than 182 days in the preceding financial year.
Who is an NRI : August 18, 2008 16 Who is an NRI In terms of Regulation 2 Foreign Exchange Management Act 1999, Non-Resident Indian (NRI) means a person resident outside India (except Nepal and Bhutan) who is a citizen of India.
Person of Indian Origin (PIO) means a citizen of any country other than Bangladesh or Pakistan who had (a) at any time held Indian passport or (b) he or either of his parents or any of his grand -parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act 1955 or (c) the person is a spouse of an Indian citizen or a person of Indian Origin.
Types of accounts for NRIs : August 18, 2008 17 Types of accounts for NRIs An NRI can open the following types of accounts:
Non-Resident (External) Rupee (NRE) Account
Non-Resident Ordinary (NRO) Account
Foreign Currency Non-Resident (Bank) (FCNR (B)) Account
Non-Resident (External) Rupee (NRE) Account : August 18, 2008 18 Non-Resident (External) Rupee (NRE) Account Who can open an account: NRIs
(individuals / entities of Bangladesh / Pakistan nationality/ ownership require prior approval of RBI)
Joint account: In the names of two or more non-resident individuals
Nomination: Permitted
Currency in which account is denominated: Indian Rupee
Non-Resident (External) Rupee (NRE) Account : August 18, 2008 19 Non-Resident (External) Rupee (NRE) Account Repatriability: Yes
Type of Account: Savings, Current, Recurring, Fixed Deposit
Period for fixed deposits: At the discretion of the bank.
Rate of Interest:
FDR: LIBOR / SWAP rates, as on the last working day of the previous month
Savings: As applicable to Domestic Savings a/c.
Non-Resident (External) Rupee (NRE) Account : August 18, 2008 20 Non-Resident (External) Rupee (NRE) Account Loans in India: Permitted up to Rs.20 lakhs
(The loans cannot be utilised for the purpose of re-lending or for carrying on agriculture or plantation activities or for investment in real estate business).
Loans abroad: Permitted, Provided no funds are remitted to India and are used abroad only.
Operations in the account cannot be permitted on POA basis for local payments or remittance to the account holder himself through normal banking channels.
Non-Resident Ordinary Rupee Account (NRO A/C) : August 18, 2008 21 Non-Resident Ordinary Rupee Account (NRO A/C) Who can open an account: NRIs
(individuals / entities of Bangladesh / Pakistan nationality/ ownership require prior approval of RBI)
Joint account: May be held jointly with residents.
Nomination: Permitted
Currency in which account is denominated: Indian Rupee
Non-Resident Ordinary Rupee Account (NRO A/C) : August 18, 2008 22 Non-Resident Ordinary Rupee Account (NRO A/C) Repatriability: Not repatriable except for the following in the account - 1) current income 2) up to USD 1 million per financial year (April- March), for any bonafide purpose out of the balances in the account / sale proceeds of assets in India acquired by way of inheritance / legacy inclusive of assets acquired out of settlement subject to certain conditions.
Non-Resident Ordinary Rupee Account (NRO A/C) : August 18, 2008 23 Non-Resident Ordinary Rupee Account (NRO A/C) Types of Account: Savings, Current, Recurring, Fixed Deposit
Period of Fixed Deposits: As applicable to resident accounts.
Rate of Interest: Banks are free to determine interest rates for term deposits.
Loans in India: Permitted
Loans abroad: Not permitted
Loans in Forex: Not permitted.
Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR(B) Account) : August 18, 2008 24 Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR(B) Account) Who can open an account : NRIs
(individuals / entities of Bangladesh/ Pakistan nationality/ ownership require prior approval of RBI)
Joint account: In the names of two or more non-resident individuals
Nomination: Permitted
Currency in which account is opened: Pound Sterling, US Dollar, Japanese Yen, Euro, Canadian Dollar and Australian Dollar
Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR(B) Account) : August 18, 2008 25 Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR(B) Account) Repatriability: Repatriable
Types of Account: Term Deposit only
Period for fixed deposits: For terms not less than 1 year and not more than 5 years.
Rate of Interest: LIBOR / SWAP rates minus 75 basis points for the respective currency / corresponding maturities.
Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR(B) Account) : August 18, 2008 26 Foreign Currency (Non-Resident) Account (Banks) Scheme (FCNR(B) Account) Operations by Power of Attorney in favour of a resident by the non-resident account holder: Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.
Loans in India: Permitted upto Rs. 20 lac.
Contact Information about the Trainer : August 18, 2008 27 Contact Information about the Trainer bhushan301@yahoo.co.in
+91 9876756600 (Mobile)
+91 172 4622020 (Landline)
Slide 28 : August 18, 2008 28 THANK YOU