With a view to providing further incentives and wider options to persons of Indian Nationality/Origin residing abroad (NRIs) and Overseas Corporate Bodies predominantly owned by NRIs (OCBs) as well as giving opportunities to persons of non-Indian origin and overseas corporate bodies owned by them for making investments in India, Reserve Bank has formulated Non-resident (Non-repatriable) Rupee Deposit Scheme. The Scheme came into effect from 15th June, 1992.
The scheme is open to all non-residents including foreign citizens of non-Indian origin (except Pakistani and Bangladeshi Nationals) and Overseas Corporate Bodies owned by them. Accounts under the Non-resident (Non-Repatriable ) Rupee Deposit Scheme may be opened in Indian rupees by authorised dealers out of the funds in freely convertible foreign exchange transferred for the purpose to India in an approved manner from the county of residence of the prospective non-resident account holder or from any other country. Accounts may also be opened by transfer of funds from the existing NRE/FCNR Accounts of the non-resident account holder. No penal interest is charged in case of premature withdrawal of existing NRE/FCNR deposits for the purpose of making investment under the scheme.
Authorised dealers are free to fix the maturity period of such deposits between six months and three years. They are also free to fix the rate of interest payable on such deposits. The exact rates may be ascertained from the concerned bank. The maturity proceed of the deposit will not quality for repatriation outside India at any time. However, the interest accrued on the deposits held under the scheme from the quarter beginning October 1, 1994 are eligible for repatriation .The income form the deposits under the schemes will be free from Indian Income-tax. Exemption from Income-tax will, however, not be available to resident donees and those resident who being joint holders, become owners of the deposits as survivors of the non-resident depositor.
NRNR vis a vis NRO Account
The depositor under both the schemes are accepted in Indian rupees on non-repatriation basis. The main points of distinction under both the schemes are as under :
(a) Accounts under NR (NR) Scheme can be opened only with proceeds of fresh remittances from abroad or by transfer from existing NR (E) FCNR Accounts of the depositor, whereas legitimate local resources may be utilised to open NRO Accounts.
(b) Advances against security of deposit under NRO Scheme are governed by directives of Reserve Bank of India, whereas banks have freedom to determine rates of interest, margin etc. while granting advances against security of deposits held under NR (NR) Scheme.