JAIIB · PPB · Unit 9Chapter Notes4–6 Marks Expected

Operational Aspects of NRI Business

Principles & Practices of Banking | Unit 9 Chapter Notes

NRE, FCNR(B) and NRO account features side by side, SNRR accounts, NRI asset remittance rules, immovable property acquisition and repatriation, and investment ceilings — all key numbers and restrictions for the JAIIB exam.

✓ By Bankopedia.co.in✓ Updated 2026✓ Account comparison table included

📌 Why This Chapter Matters in JAIIB

This chapter is consistently tested — expect 4–6 questions. The NRE vs FCNR(B) vs NRO comparison is almost always in the paper. Key numbers: minimum 1 year for NRE/FCNR(B), minimum 7 days for NRO, USD 1 million per FY remittance limit from NRO, 5%/10%/24% investment ceilings, and the list of countries needing RBI approval for immovable property.

Section 1

Introduction — Three Permitted NRI Accounts

FEMA empowers RBI to regulate deposits between residents and non-residents. To serve the large Indian diaspora, three special account types are permitted for NRIs and PIOs (PIO includes OCI cardholders):

🧠 Mnemonic — NRE, FCNR, NRO

NRE

External Rupee

Foreign earnings IN India — Freely repatriable. Tax-free.

FCNR(B)

Foreign Currency

Foreign earnings IN foreign currency — No exchange risk. Tax-free.

NRO

Ordinary Rupee

Indian income (rent, dividends) — Limited repatriation. Taxable.

Quick Numbers to Lock In

NRE TD min

1 year

FCNR(B) TD min

1 year

FCNR(B) TD max

5 years

NRO TD min

7 days

NRO remittance

USD 1 mn / FY

SNRR max tenure

7 years

NRI indiv. limit

5% equity

NRI aggregate

10% → 24%

Section 2

NRE vs FCNR(B) vs NRO — Full Comparison Table

This table is the most exam-heavy part of the chapter. The JAIIB paper frequently gives you a feature and asks you to identify the correct account.

Feature	NRE Account	FCNR(B) Account	NRO Account
Full name	Non-Resident (External) Rupee Account	Foreign Currency (Non-Resident) Account (Banks)	Non-Resident (Ordinary) Account
Who can open	NRIs and PIOs	NRIs and PIOs	Any person resident outside India; foreign nationals visiting India
Currency	Indian Rupees (INR)	Any freely convertible foreign currency designated by RBI	Indian Rupees (INR)
Account types	SB, CA, RD, FD	Fixed Deposits ONLY (no RDs)	SB, CA, TD, RD
Min TD tenor	1 year	1 year	7 days
Max TD tenor	No cap	5 years	No cap
Interest tax	Exempt from Income Tax & Wealth Tax	Exempt from Income Tax & Wealth Tax	Taxable in India
Repatriability	Freely repatriable (principal + interest)	Freely repatriable (principal + interest)	Current income freely repatriable; capital up to USD 1 mn per FY
Source of funds	Inward remittances from abroad; FX brought during visit (with CDF); transfers from NRE/FCNR(B)	Inward remittances from abroad; transfers from NRE/FCNR(B)	Inward remittances; legitimate dues in India; transfers from other NRO accounts; INR gift/loan by resident relative (within LRS)
Debits	Local payments; remittances outside India; transfers to NRE/FCNR(B)	Same as NRE	Local payments; transfers to NRO accounts. Remittances abroad only for current income or up to USD 1 mn per FY
Joint account	Two or more NRIs/PIOs; or NRI/PIO with resident relative on 'former or survivor' basis	Same as NRE	NRI jointly with residents on 'former or survivor'; jointly by NRIs/PIOs
When NRI returns to India	Redesignated as RFC account or resident account	Continues till maturity; then converted to RFC or resident rupee account	Redesignated as resident account (if indicates intention to stay indefinitely)

Section 3

NRE Account — Detailed Rules

PoA Holder Permissions on NRE Account

✓ PoA holder CAN

→Withdrawals for local payments
→Remittance to the account holder through banking channels
→Make permitted investments in India

✕ PoA holder CANNOT

✕Open a new NRE account
✕Repatriate funds outside India (except to the NRI account holder)
✕Make payment as gift to a resident on behalf of the account holder
✕Transfer funds to another NRE account

Loans Against NRE Deposits

Loans in India

→To account holder or third party in India.
→No monetary limit on loan amount.
→Loan amount CANNOT be repatriated outside India.
→Eligible uses: personal purposes, business, investment (non-repatriation), acquiring own residential flat/house.
→Prohibited uses: relending, agricultural/plantation activities, real estate business.
→Lien NOT allowed on NRE Savings deposits.

Loans Outside India

→AD may allow branches/correspondents outside India to lend against NRE deposits in India.
→Borrower: the non-resident depositor or third parties for bonafide purpose.
→Premature withdrawal of NRE deposit charged as security is not allowed.

Section 4

FCNR(B) Account — Detailed Rules

Interest Rate Rules

Types of rate

Both floating and fixed rates permitted

Floating reset period

6 months

Reference rate

Overnight ARR / FBIL swap rates

Interest calculation

360-day year basis; at 6-monthly rests

Tenor	Maximum Mark-up (above reference rate)
Less than 3 years	Up to 250 basis points above Overnight ARR / FBIL swap rate
3 years to 5 years	Up to 350 basis points above Overnight ARR / FBIL swap rate

Tenor Blocks

1 year and above but < 2 years

2 years and above but < 3 years

3 years and above but < 4 years

4 years and above but < 5 years

5 years only

Premature Withdrawal — No Penalty Cases

→Conversion into RFC Accounts on return to India
→For splitting the deposit, if the period and aggregate amount remain unchanged
→Consequent to the transfer of business of the branch to another bank

Section 5

NRO Account & Accounts for Foreign Nationals

NRO — Key Rules

→Minimum TD tenor: 7 days (much lower than NRE/FCNR).
→Interest is taxable in India (unlike NRE/FCNR which are tax-free).
→NRIs/PIOs can remit up to USD 1 million per FY from NRO (including transfers to their NRE accounts).
→Loans against NRO deposits are permitted at usual norms; cannot be used for relending, agriculture/plantation, or real estate.
→When a resident becomes non-resident: existing resident account is re-designated as NRO account.
→When an NRI returns to India: NRO account is re-designated as resident account if they indicate intention to stay indefinitely.

Accounts for Foreign Nationals — Special Rules

Non-Indian origin visiting India

NRO (current/savings) account. Balance may be paid when leaving India if held ≤ 6 months with no local credits (except accrued interest).

Foreign nationals leaving India

Resident account re-designated as NRO. Credits must be bonafide dues earned as a resident. Repatriation not to exceed USD 1 mn per FY. Account closed after all dues collected.

Pakistan nationals / entities

Prior RBI approval required to open any account.

Bangladesh nationals

Allowed with valid visa and residential permit issued by FRO/FRRO.

Bangladesh entities

Prior RBI approval required.

Minority communities from Bangladesh/Pakistan (LTV holders)

AD may open only ONE NRO account. Can be opened for 6 months, renewed at 6-monthly intervals if LTV application pending. Reported to MHA quarterly. Converted to resident account on acquiring Indian citizenship. Minority communities: Hindus, Sikhs, Buddhists, Jains, Parsis, Christians.

Section 6

Special Non-Resident Rupee (SNRR) Account

SNRR accounts are for foreign nationals or entities with business relationships in India — essentially a business-purpose rupee account for non-residents.

Eligible personsAny person resident outside India with business interest in India

Pakistan / BangladeshNeed prior RBI approval

CurrencyIndian Rupees only

InterestNIL — no interest is paid

Maximum tenure7 years (concurrent with contract/business); RBI approval for renewal

RepatriationBalances can be repatriated

Transfers from NROPROHIBITED

TaxesAll transactions subject to applicable taxes in India

Prohibited actionCannot make foreign exchange available to any resident in India

⚠️ Exam trap — SNRR vs NRO

SNRR is for business purposes; NRO is for personal/bonafide dues. The SNRR account pays zero interest. Transfers from NRO to SNRR are prohibited. Maximum tenure is 7 years (not indefinite).

Section 7

Remittance of Assets Held by NRIs/PIOs

General Permission — Up to USD 1 mn per FY

ADs can allow NRIs/PIOs to remit up to USD 1 million per financial year on production of documentary evidence from the following assets:

→Assets from NRO account balances.
→Assets acquired by way of inheritance/legacy.
→Assets under a deed of settlement by either parent or a relative (per Companies Act 2013), effective on the death of the settler.

All instalments must be remitted through the same AD. For NRO account remittances, an undertaking that the funds are not from borrowings in India must be obtained.

RBI Prior Approval Required for

→Remittances in excess of USD 1 mn in a FY — for legacy/bequest/inheritance to a citizen of a foreign state residing outside India; or by NRIs/PIOs from NRO accounts/sale proceeds of assets.
→Hardship cases — where refusal of remittance would cause hardship to the remitter.
→Sale proceeds of assets in India held by any person, if not covered under existing RBI directions.

Section 8

Acquisition & Transfer of Immovable Property

What NRIs/PIOs/OCIs Can Acquire

→Purchase from, or receive as gift from, a resident in India or another NRI/OCI (who is a relative per Companies Act 2013).
→Inheritance from any person resident in India or a person resident outside India who acquired it as per foreign exchange laws.
→EXCEPT: agricultural land, plantation property, and farm houses — these cannot be acquired.

Repatriation of Sale Proceeds — Restrictions

→AD may allow repatriation if: property was acquired as per foreign exchange laws; and consideration was paid by inward remittance from abroad through banking channels or by debit to FCNR(B)/NRE account.
→Repatriation of sale proceeds of RESIDENTIAL properties is restricted to a maximum of TWO properties.
→All transactions involving transfer of immovable property by a non-resident must be through banking channels in India.

Country-wise Restrictions — Exam Hotspot

Pakistan / Bangladesh (individuals/entities)Prior RBI approval required to acquire or transfer immovable property

Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong, DPRKPrior RBI approval required — except lease of not more than 5 years

OCI cardholders of above countriesExempt — OCI cardholders are NOT restricted

LTV holders (minority communities from Afg/Ban/Pak)Can purchase 1 residential unit + 1 commercial property for self-use only; sale only after acquiring Indian citizenship

Restricted countries (11 total): Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong, DPRK — need prior RBI permission except for lease ≤ 5 years.

Section 9

Investments by NRIs/PIOs — Prohibited Sectors & Ceilings

Prohibited Investment Sectors (even for NRIs/OCIs)

1.Lottery business (Government, private, online)
2.Chit funds (NRIs/OCIs can invest on non-repatriation basis — this is an exception)
3.Gambling and betting including casinos
4.Nidhi company
5.Trading in Transferable Development Rights (TDRs)
6.Real estate business or construction of farm houses
7.Manufacturing of cigars, cheroots, cigarillos and cigarettes (tobacco products)
8.Atomic energy
9.Railway operations (activities not open to private sector)

⚠️ Exception to remember

Chit funds — while prohibited generally, NRIs/OCIs CAN invest on a non-repatriation basis. This exception is a common MCQ trap.

Investment Ceilings in a Listed Indian Company — Exam Critical

Investor	Equity Capital Ceiling	Debentures / Pref Shares / Warrants
Individual NRI / OCI	Up to 5% of total paid-up equity capital (fully diluted)	Up to 5% of paid-up value of each series of debentures / preference shares / warrants
All NRIs + OCIs combined	Up to 10% of total paid-up equity capital (fully diluted)	Up to 10% of paid-up value of each series — can be raised to 24% by special resolution of the company

The aggregate 10% ceiling can be raised to 24% if the Indian company passes a special resolution to that effect at its General Body meeting.

NRE (PIS) Account — Dedicated Account for Stock Exchange Investments

For NRI/OCI investments in capital instruments of listed Indian companies on repatriation basis (through a stock exchange), a dedicated NRE (PIS) Account must be maintained at a designated AD branch.

Permitted Credits

→Inward remittances from abroad
→Transfers from NRE/FCNR(B) accounts
→Sale proceeds (net of taxes) of capital instruments on stock exchange
→Dividend/income on repatriation basis investments

Permitted Debits

→Purchase of capital instruments on stock exchanges
→Outward remittances of dividend/income
→Charges on sale/purchase of capital instruments
→Remittances outside India or transfer to NRE/FCNR(B) accounts

Non-Repatriation Basis Investments — Key Restrictions

→Sale/maturity proceeds must be credited ONLY to the NRO account — not remittable abroad.
→Amount invested and capital appreciation CANNOT be repatriated abroad.
→Deemed as domestic investment.
→Prohibited from: Nidhi company, real estate, agricultural/plantation activities, farm house construction, dealing in TDRs.
→Payment may be from inward remittance or NRE/FCNR(B)/NRO account funds.

Section 10

Chapter at a Glance — Key Numbers

Rule / Threshold	Figure	Context
NRE TD minimum tenor	1 year	No maximum ceiling
FCNR(B) TD minimum tenor	1 year	Maximum is 5 years
NRO TD minimum tenor	7 days	Much lower than NRE/FCNR
NRO remittance limit (general)	USD 1 mn per FY	Includes transfer to own NRE accounts
NRO remittance >USD 1 mn	Prior RBI approval	For inheritance/legacy to foreign citizens
FCNR interest mark-up (< 3 years)	Up to 250 bps	Above overnight ARR / FBIL swap rate
FCNR interest mark-up (3–5 years)	Up to 350 bps	Above overnight ARR / FBIL swap rate
FCNR floating rate reset period	6 months	For floating rate FCNR deposits
SNRR maximum tenure	7 years	Renewal needs RBI approval
SNRR interest	NIL	No interest paid on SNRR
Individual NRI/OCI equity ceiling	5%	Of total paid-up equity of listed Indian company
Aggregate NRI+OCI equity ceiling	10% (→ 24%)	24% by special resolution of General Body
Repatriation of residential property	Max 2 properties	Proceeds of sale of residential property
Countries needing RBI for property	11 countries	Pak, Ban, SL, Afg, China, Iran, Nepal, Bhutan, Macau, HK, DPRK
Lease exception for restricted countries	≤ 5 years	No prior RBI needed for short-term lease
Foreign national NRO account	≤ 6 months	Paid back on departure if no local credits
LTV minority community NRO	6 months + renewals	One NRO account; renewable if LTV pending

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Practice Test

Chapter 9 Mock Test — Coming Soon

Exam-standard MCQs on NRE/FCNR/NRO, SNRR, investment ceilings, immovable property rules — timed, graded, PRO.

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