Parking your funds? Need a lucrative parking spot? Book it at the ease of your fingertips on your smartphone screens! NRIs?? Are you still looping on the same dusted roads with flat tyres screeching of low interest rates? About time you changed that! Let’s discuss NRE Deposits in India.
Is this the right time to book NRE deposits in India?
The time can’t be better. With the global market lodged by the hands of the outbreak of COVID-19, when everything is literally standing still, halted for the better. Why wait? Wondering whether It is the right time to book your NRE deposit in India? It’s the perfect time.
Go Full Throttle on Long term Bets
NRE Deposits range from a minimum investment period of 1 year to a maximum of 10 years. NRE Deposits holds the income earned outside India for NRIs and the interest earned on the deposits are tax free and fully and freely repatriable from India. The current interest rates on NRE FD falls in the range of 6% to 8%. With the collateral damage inflicted on the global market because of the pandemic, COVID-19, it can be expected that the interest rates on NRE FD will plunge to the 4% to 5% range in order for the banks to regain strength. Also, there has been a decline of $5.35 Billion in the Indian Forex Reserves, which is the highest in the past 8 years, that clearly opens the door for lucrative interest rates for current investments. This is the time to capitalize on the higher interest rates, place the long term bets safely and rejoice on your decision as the worldwide market downfall influences the interest rates in the near future.
Check out the current interest rates offered by the top banks on NRE FD in India:
| Banks | Interest on NRE FD |
|---|---|
| ICICI | 5.50%* |
| SBI | 5.40%* |
| Kotak | 5.25%* |
| RBL | 7.50%* |
| HDFC | 5.50%* |
| IndusInd | 7%* |
| Bank of Baroda | 5.40%* |
| Axis | 5.50%* |
| SBM | 7%* |
| Federal | 5.85%* |
| Citibank | 3.90%* |
Also Read: How to open an NRI Account in India
THE URGENCY
Now, the most important point that we need to understand here is the urgency that surrounds us. The banks are going to cut their interest rates on deposits in the coming years to balance their losses. The market is right and all set to bounce back in the next 3-4 years. According to Moody’s, Fitch and S&P, India would be one of few countries which might escape recession and is still expected to have a positive GDP growth. Hence, it might be a good time to invest.
If you invest now, you can book your deposits at the current interest rates and stay unaffected by the cropping of the rates in the coming time. You will be paid the interest on the current rate if you book your Deposits now, if the rates fall before you book your deposits, you won’t be able to capitalize on the higher interest rates at present. Hence, the urgency!
What happens to NRE FD after returning to India?
NRIs often wonder what will happen if they opt for an NRE FD and then return to India? In case, you too are one of those NRIs, we have the answer for you. Check out the effects on your NRE Deposits post your return to the motherland:
- The NRE Deposits need not be converted to resident accounts after your return to India. They can remain as-is till maturity while the NRI converts to a resident
- Withdrawals can only be done in Indian Rupees
- For NRE FDs broken before maturity, interest is calculated on the number of days the FD was held with the bank
- Premature breaking of NRE FDs are subject to penalties that vary from bank to bank
- Post maturity, NRE Deposit Accounts can be converted into Resident Foreign Currency (RFC) Accounts. All freely convertible currencies are allowed for RFC Accounts such as US Dollar, British Pound, Euro, Yen
- The interest will be payable at the original rate for deposits held for full term even after conversion to an Resident Foreign Currency (RFC) Account
- The interest earned on NRE Deposits that have been converted to RFC Accounts will be exempt from tax if the status of the returning NRI is RNOR (Resident but Nor Ordinarily Resident). Conditions for being an RNOR are:
- The individual has stayed abroad for 9 years in the previous 10 years
- During the 7 financial years preceding the year the individual returned to India, they must have stayed in India for 729 days or less
A summary of the NRE Account
| Factors to consider | Non Resident External (NRE) Account |
|---|---|
| Purpose | For income earned outside India |
| Currency | INR |
| Tenure of Deposits | 1 year to 10 years |
| Interest | Up to 7.81%* |
| Repatriation(transfer of money from Indian bank account to foreign bank account) | Both Principal (money invested initially) and Interest completely repatriable |
| Tax Deductions | No tax |
With everything that’s happening in the world right now, we are swirling in the inevitable whirlpool of change. Wisdom is essential in anticipating the positive and the negative effects. Capitalizing on the present situation is the best step NRIs can take towards a gainful future.
Tip of the day: It is the perfect time to book NRE Deposits in India. Park your funds today! To get early access to the solutions for all NRI Banking related issues or booking an FD, contact us using the button below.