PIOs and Time Deposits

abatra1

Hey everybody, first time IMer here.

I was wondering if PIOs are able to qualify for the high interest rate time deposits that Indian Banks offer. If not what is the criteria to qualify for such an account.

Nick-H

Residency is the main qualification, not status.

So being a PIO (or a pio, or an NRI) doesn't get those rates if you don't live here.

If India's interest rates were available to non-resident foreigners, there would be a massive inflow of money into the country!

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GoanCanuck

Depends on which term deposits you are referring to. There are a couple of attractive schemes for PIO's whereby you can get fairly high rates.

abatra1

Thanks for the quick reply Nick-H.... I've already read hundreds of your posts on here though I just became a member. I think you do a great job in helping people find there way around India.

So how can a person establish residency in order to qualify.

Nick-H

Well, I hope this isn't too silly an answer, but --- living here would be a good start!

But it is going to depend very much on your national status, if you are of Indian origin, Indian citizen.

Thanks for your kind remarks. I'm afraid I won't be able to follow up on this one, as I'll be offline for a few days due to builders swarming all over my house.

abatra1

What types of schemes would these be GoanCanuck.

GoanCanuck

You have NRE term deposits as well as NRO term deposits accounts for PIO's who wish to maintain rupee accounts and FCNR accounts for dollar based accounts.

http://www.hdfcbank.com/nri/accounts...d_interest.htm

crvlvr

I thought the NRO acounts paid the same interest as the Indian accounts. Do they pay less?

GoanCanuck

It is usually about 1% less but you can negotiate if you have a large amount to invest. The main problem with the NRO accounts is that you do not get an International Debit Card with it. With the NRE account you do get an International Debit Card.

Another thing I have observed the last few months is that the public sector banks in India have started becoming very competitive and they are giving about 0.5% additional interest as compared to the private banks. I got a quote from ICICI and went to SBI who were able to beat their rate without a problem.

abatra1

I read somewhere that to open a NRO fixed deposit, the money has to be earned in India. What about for money earned outside the Country?

Thanks for all the help.

capt_mahajan

That is incorrect. The money can be earned anywhere and depostied in an NRO deposit.

The thing is, money earned in India can only be deposited in an NRO deposit, and not an NRE one.

Nick-H

Can we have a glossary of all these abbreviations, please?

Captain?

capt_mahajan

Banking terms:

NRO=Non resident ordinary savings bank account. A non resident can open this jointly with a resident, or all by himself/herself/itself .

NRO fixed deposit: Fixed deposit for a NRO account. Rates were as high as 20% plus in some banks a few years ago (yes, I have got 21% with UTI bank), but this was a time when the balance of payments crisis was looming and foreign exchange was badly needed by India. (Note: Interest taxable at 30% or less, thanks goancanuck)

All NRO accounts are not freely repatriable, which means you have to follow RBI guidelines. Pretty lenient now, but once upon a time a tourist going abroad had to get RBI permission for everything.

Only the interest is repatriable.

Rupees can also be deposited in a NRO account.



NRE:Non resident external savings bank account. Only Non residents can open this. Remittances must be in foreign exchange.

FCNR: foreign exchange fixed deposit. Only for Non residents.

There was a time (80's) when the dollar was appreciating 15/20% annually, and the interest rate on a FCNR (Foreign convertible non resident account, I think is the full form) was 9/11% in USD, which meant you got a 24/31% return in rupee terms, income tax free. Of course, inflation was 11%, but ordinary resident fixed deposits gave you 13 before tax, so this was great. The proceeds were freely repatriable, including the principal.

The FCNR is still there, dunno how many are brave enough for this in todays times, dollar at 9 year low vs rupee.


today's scenario NRO fixed deposit rates on par with domestic rates, almost.

FCNR deposits: not recommended. Dollar dropping and rates low. Only advantages are tax and repatriation.

edit FCNR may make sense for somebody who has lower interest rates at home, and wants to repatriate money since no Indian expenses. But eligibility criteria must be met to open the account in the first place.

Current rates with one bank
http://www.axisbank.com/nri/interest...osit-Rates.asp

GoanCanuck

That is not true. The money can be earned anywhere but once it is deposited into the NRO account it cannot be repatriated. Only the interest is repatriable.

GoanCanuck

Only NRE and FCNR accounts are tax free. The interest earned on NRO deposits is taxed at 30%.