What is Bank deposits

BANK DEPOSITS:

       NRIs can open and operate specialized bank account in India classified as NRE, NRO andFCNR accounts. While FCNR (foreign currency non-resident) is a foreign currency account and can be opened only as a term (fixed) deposit account, the NRE/NRO (non-resident external/nonresident ordinary) accounts  are denominated in rupees and can be opened either as a savings or a fixed deposit account.

           However, before approaching a banker, you have to be clear about the purpose for which you are opening the account, as that decides the type.If you want to invest in India, you need to have a bank account denominated in Indian rupees - basically either an NRE or NRO account. Again, if you intend repatriating the income from such investments, you need to make that investment only through an NRE account.

             An NRO account is normally only for making payments on dues in India and receiving rental and other incomes. It allows credit of funds from your overseas account too.However, what you need to note here is that there are several restrictions on repatriation of funds from this account.Money in this account can be repatriated within a limit of $1 million in a year on paying the applicable charges to the banker. An FCNR account, however, saves you from forex rate fluctuations by allowing you to hold the foreign currency without converting it into rupees.

             Now, let's move into the more interesting part - interest income. An NRE/NRO savings account earns an interest of around 4% per annum. Currently this is on a par with the savings accounts rate for resident Indians. On a term deposit of maturity period over 1year but less than 2years, these accounts earn around 9% a year. 2years back, an NRE account earned just 2.5-3% p.a. The current high interest rate is thanks to the RBI deregulating interest on NRE deposits in December 2011.On an FCNR account that is denominated in the US dollar, Kotak Mahindra Bank offers an interest of 2.73% p.a (94 basis points more than 2011 rates) with a maturity period over a year but less than 2years. The interest is based on LIBOR rates for the respective currency.