If you have any resident bank account in India you need to convert it to an NRO account immediately!

As an NRI, it’s illegal to hold a resident bank account in India:

If you’re an Indian who has stayed outside India for 182 days or more during the preceding financial year, then your residency status in India changes to a Non-Resident Indian (NRI). As per FEMA regulations, when you become a Non-Resident Indian (NRI), you’re required to close your existing resident bank account in India or convert it to an NRO (Non-Resident Ordinary) account. However, still, some of us continue operating it as we may not be aware of the regulation. But, this is strictly illegal according to the law.

Government’s deadline for linking bank accounts with Aadhaar card by 31st March 2018

According to an Indian government notification, all the Indian residents have been asked to link their bank accounts with their Aadhaar numbers by 31st March 2018, failing which the accounts will cease to be operational. However, NRIs or OCIs cannot link their bank accounts to Aadhaar card, as they are not eligible to apply. So, what does this mean to you if you do have a resident bank account in India?

The simple option is to close such accounts to comply with the regulation. However, there is another option: Converting your resident bank account to a Non-Resident Ordinary (NRO) account with your bank.

What is a Non-Resident Ordinary (NRO) account?

There are three types of Non-Resident Bank Accounts in India for NRIs and OCIs – Non-Resident Ordinary (NRO), Non-Resident External (NRE) and Foreign Currency Non-Resident (FCNR) Bank Account. All of these are exempted from the requirement of linkage with Aadhaar card.

Non-Resident Ordinary Account (NRO Account) and Non-Resident External Account (NRE Account) can be a savings account or fixed deposit in Indian Rupees. You can deposit money into these accounts, by converting foreign currency into Indian Rupees (USD to INR, GBP to INR, AED to INR, CAD to INR, AUD to INR, etc) through a money transfer provider. However, there are few differences between the two:

• You can convert your resident bank account in India to an NRO account only but not an NRE account.
• You can deposit cash in Indian Rupees or allow local receipts (such as rent income, dividend, pension, etc) from other resident bank account or NRO account only into your NRO account but not an NRE account.
• You can transfer money from an NRO account to another NRO account or a resident bank account, but not to an NRE account. However, you can transfer money from an NRE account to another NRE account or NRO account.
• It's easier to repatriate funds from an NRE account without any documents and there is no limit on the repatriation amount as long as it is from your NRE account. However, the Government of India allows you to repatriate funds from your NRO account (NRO savings account or NRO fixed deposit) up to USD 1 million per financial year abroad. This also requires few documents like a certificate from a chartered accountant in India.

Foreign Currency Non-Repatriable (FCNR) account is very different to NRE or NRO accounts. This is a Fixed Deposit Foreign Currency account and not an Indian Rupee account. Deposits in this account can be made in any of the major currencies like US Dollar, UK Pound, Canadian Dollar, Deutsche Mark, Japanese Yen, and Euro.

We recommend to maintain both NRE and NRO accounts in India – NRE account to manage your payments in India (EMI for your home loan in India, property purchase, family maintenance, insurance, etc) and NRO account to deposit your earnings in India (such as rent income, dividend, pension, etc). Most of the banks add balances in both accounts for the computation of the minimum average balance required to be maintained in these accounts.

How can I convert a resident bank account to an NRO Account:

You need to complete and submit an application form with the bank you maintain your resident bank account. Most banks facilitate completion of the form on their website or a download of the form. If not, then you can contact their call centre. Once you complete the form, you need to attach the following documents and send it to the address mentioned on the form. Few banks offer a free local collection or postage:

• Address proof of your foreign address
• Copy of your passport
• Copy of visa/work permit
• Your OCI or PIO card
• Your photographs

After receiving and verifying the application and documents, your bank will convert the resident bank account to NRO. On the other hand, if you want to open only an NRE account and not an NRO account, your bank will close the resident bank account and open an NRE account.

This is how you can convert your resident bank account to NRO account in India.

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Disclaimer: Please note that it is our endeavor to provide unbiased and accurate information but cannot guarantee it to be perfect, so please do your bit of research and use the information from this article at your own risk.