Banks cannot give additional interest rate benefit of one per cent per annum to their own staff on deposits under FCNR (B), NRE and NRO accounts, according to the Reserve Bank of India.
In a notification, the RBI said, “On a review, it has now been decided that banks should not allow the benefit of additional interest rate on any type of deposits of non-residents.
“Accordingly, the discretion given to banks to allow the benefit of additional interest rate of one per cent per annum as available to bank’s own staff on deposits under FCNR(B)/ NRE/ NRO accounts stands withdrawn.”
The Foreign Currency (Non-Resident) Accounts (Banks) scheme covers deposits in Pound Sterling, US dollar, Canadian dollar, Australian dollar, Euro and Japanese Yen from non-resident individuals of Indian nationality or origin (Non-resident Indians).
FCNR(B) deposits can be made for a minimum of one year and a maximum of five years. Both principal and interest are payable in foreign currency.
Rupee loans can be taken in India against the security of FCNR(B) deposits. Foreign currency loans can also be taken at select branches of Indian banks abroad against the security of FCNR deposits.
Non-Resident (External) Rupee Account (NRE Account) can be opened/maintained in the form of savings, current, recurring or fixed deposit accounts. Such accounts can be opened only by the non-resident himself and not through the holder of the power of attorney.
Balances held in the NRE account are freely repatriable. Accrued interest income and balances held in NRE accounts are exempt from income-tax and wealth tax, respectively.
Non-Resident Ordinary Rupee Account (NRO Account) NRO can be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. These accounts are denominated in rupees.
NRIs/Persons of Indian Origin can remit from the balances held in their NRO account an amount not exceeding $1 million per financial year, subject to payment of applicable taxes.