Three regulatory changes that will make NRIs happy

The Reserve Bank of India (RBI) in December deregulated the interest rate paid by banks on non-resident (external) rupee (NRE) deposits, following which most banks are now offering higher interest rate on NRE account, in line with the rates being offered on domestic term deposits.

This effectively means that NRIs can now earn more on their deposits. However, this is not the only good news for the NRIs.

RBI has accepted some of the recommendations made by the committee headed by K.J. Udeshi, which was set up to review the facilities for individuals under the Foreign Exchange Management Act (Fema), 1999. The apex bank has liberalized certain provision of Fema, which besides helping NRIs would also help resident Indians.

NRIs can open joint account with Indians

Based on the recommendations, RBI permitted NRIs to open an NRE account jointly with a relative albeit with conditions. The account needs to be opened on former-or-survivor basis. Also, resident Indian relative can transact only if he/she has the power of attorney. But despite these restrictions, the decision permitting opening of joint accounts would reduce the problems faced by NRIs and their relatives to a large extent. “Earlier, a close relative of a NRI could not withdraw money on his behalf, even if the NRI needed the money in emergency. But now, it is possible to do so,” said a public sector bank official, who did not want to be named.

The joint account option is also likely to reduce the problems that a legal heir or nominee faces in getting back the balances in case of demise of an NRI.

Paying for medical expenses made easier

Indian residents till few months ago were only allowed to make payments on behalf of their NRI relatives towards meeting expenses on boarding, lodging and services as well as travel. But Indian residents where not allowed to meet the medical expenses of NRI relatives. However, the committee recommended inclusion of medical expenses in the permissible list and the apex bank has accepted the recommendations provided such expenses are incurred in India.

NRIs can avail loan from Indian relatives

Till a few months ago, NRIs were allowed to borrow only from designated bank branches and not from relatives. Since mid-September, the apex bank has permitted NRIs to borrow from close Indian relatives provided such loan is interest-free and the minimum tenor of such loan is one year. Also, the loan should be utilized for meeting the borrower’s personal requirements or for his own business purposes in India and should not use the same for any activities in which investment by NRIs is prohibited. These include chit funds, agricultural or plantation activities, real estate business, including construction of farm houses, and trading in transferable development rights.

However, there is a limit on the amount of loan you can take from relatives. The total amount of loan in any fiscal cannot exceed $200,000.

With these recent changes, NRIs would certainly find the going easier in India.