Latest personal finance news and trends in India
There are several options available for NRIs considering opening a account in an Indian bank: Non-Resident Ordinary (NRO) Savings Account, NRO Fixed Deposit Account, Non-Resident External (NRE) Savings Account, NRE Fixed Deposit Account and Foreign Currency Non Resident (FCNR) Fixed Deposit Account.
Each of these account types has certain advantages and disadvantages. Understanding them can help you in making a choice. Factors to consider include:
- Source of the funds in the account: Are the funds to be deposited in these accounts from sources in India or abroad?
- Currency in which the account is maintained and associated currency rate risks if you want to convert back into the foreign currency: Do you intend to repatriate the currency back to your country of residence at some point?
- Repatriability: Can you convert back to the foreign currency?
- Taxation in India on the principal and interest earned: Do you have to pay taxes for the money in India?
- Ability for an Indian resident to operate the account with a mandate: Can a family member in India operate the account with a mandate card issued by the bank?
- Can the account have a Indian resident as a joint account holder? Note that this is different than having a family have the ability to withdraw funds from the account as a mandatee.
Key aspects of NRE accounts are as follows:
- NRE accounts are maintained in rupees. This means that the foreign currency is converted to Indian rupees at the prevailing foreign exchange rates when the money is deposited into the account.
- The primary source of funds deposited into NRE accounts must be from your earnings abroad. In other words, you cannot deposit money from sources in India such as house rent or pensions in this account.
The principal amount and the interest are fully repatriable (can be converted to any foreign currency). The conversion back to foreign currency is done at the prevailing forex rates.
Interest income earned on the money in a NRE account is non-taxable in India. However, it may be taxable in your country of residence as per that country’s tax rules.
You can only have other NRIs as joint account holders on NRE accounts. Resident Indians cannot be joint account holders in NRE accounts with NRIs.
Key aspects of NRO accounts are as follows:
- NRO accounts are maintained in rupees. This means that the foreign currency is converted to Indian rupees at the prevailing foreign exchange rates when the money is deposited into the account.
- The source of funds deposited into NRO accounts can be from India or abroad. NRO accounts are appropriate for NRIs who have had earnings in India earlier and became NRIs later as well as NRIs with income from sources in India such as house rent, pensions etc. You an also deposit money from your earnings abroad or transfer money from a NRE account into a NRO account.
Current Income like rent, dividend, pension can be remitted abroad through the NRO account. Funds which can be repatriated from the NRO are subject to a maximum limit of USD 1 million per financial year. Repatriability is subject to conditions.
Interest income earned on the money in a NRO account is liable for taxes in India.
You can have other NRIs or resident Indians as joint account holders on NRO accounts.
Key aspects of FCNR accounts are as follows:
- FCNR accounts have to be opened and maintained in the foreign currency itself.
- The source of funds deposited into FCNR accounts have to be from sources abroad. They can also be from your other NRE or FCNR accounts.
- The principal amount and the interest are fully repatriable
- Interest income earned on the money in a FCNR account is non-taxable in India. However, it may be taxable in your country of residence as per that country’s tax rules.
You can only have other NRIs as joint account holders on FCNR accounts. Resident Indians cannot be joint account holders in FCNR accounts with NRIs.
NRE and FCNR accounts have the advantages of not having to pay taxes in India which could be a hassle for NRIs trying to figure out the tax rules in India as well as their country of residence.
People opening NRE accounts and would like to repatriate their funds at some point must consider the foreign currency conversion rates at the time the funds are being deposited versus the time when the funds have to be repatriated. This can carry risks as well as rewards depending on the forex rates trend. For example, if $1000 is converted to Indian rupees at Rs. 50 per dollar and then converted back to dollars at a conversion rate of Rs. 40 per dollar, then you would get back $1250 for a good gain. On the other hand, if the dollar is at Rs. 55 per dollar, you would lose some of your principal when you do the repatriation.
FCNR accounts do not carry any forex rate risk as the accounts are always maintained in the foreign currency.
NRO accounts have the advantage of being able to deposit funds from both sources in India and abroad and having joint account holders in India. Repatriability of funds is a disadvatage for NRO accounts.
The key advantage of NRO fixed deposit accounts is the substantially higher interest rates as compared to FCNR and NRE accounts. Check Ratekhoj for latest NRO fixed deposit interest rates offered by various banks in India. The rate of interest offered is different in different banks and also depends on the fixed deposit tenure. So your choice of which bank to open a account in can depend on the interest rates.
FCNR and NRE fixed deposit accounts typically yield much lower than NRO fixed deposit accounts. Check Ratekhoj for latest FCNR and NRE rates. Most banks in India offer the same interest rate for FCNR and NRE fixed deposit accounts. So if you are planning to choose a bank for your NRE or FCNR fixed deposits, interest rates offered is not a consideration.
Both NRE and NRO savings accounts yield 3.5% currently. There is no savings account option for FCNR accounts.
NRE Savings and NRO Savings accounts allow you to have family members in India as mandate holders whereas you cannot have mandatees for the fixed deposit options available in NRE, NRO and FCNR accounts. Mandate holders can withdraw funds from your accounts in India with some type of a card such as a debit card of a ATM card. They can also withdraw funds at the bank locations. Banks such as Citibank allow you to even specify certain conditions on the amounts of withdrawals allowed per month on the operations of the mandatee.
Most banks also provide for taking loans for a certain percentage of your existing balance on your NRE, NRO and FCNR fixed deposit accounts. Check with the banks for details on loans.
Home loan interest rates have been reduced by 0.25% by United Bank of India, a public sector bank, effective from April 1. The bank has cut its Benchmark Prime Lending Rate by 0.25% and has passed on the cut to home loan borrowers. The cut in home loan rates applies only to floating rate home loans.
United Bank of India is offering a interest rate of 8.25% fixed for first 5 years for a home loan of upto Rs. 5 lakhs and a interest rate of 9.00% fixed for first 5 years for a loan between Rs. 5 lakhs and Rs. 20 lakhs. This rate of interest shall be reset after 5 years and the borrower will then have the option for going for a fixed rate or floating rate of interest. These interest rates are offered under a special scheme upto 30-06-2009 and are offered for the purpose of construction or outright purchase of new/old house/flat.
For home loans between Rs. 20 lakhs and Rs. 30 lakhs and a loan duration of upto 5 years, the interest rate is 9.25%. For the same loan amount, the interest rate is 9.75% for loans between 5 and 10 years, 10% for loan period of between 10 and 15 years and 10.25% for loans between 15 and 20 years. These rates are under the floating rate category.
For home loans above Rs. 30 lakhs, the bank is offering a interest rate of 9.75% for a loan duration of upto 5 years, 10.25% for loan duration of between 5 and 10 years, 10.50% for loans of between 10 and 15 years and 10.75% for loans over 15 years and under 20 years. These rates are under the floating rate category.
There is no change in the rates offered under the fixed rate home loan category.
Latest home loan interest rates across all major banks and other institutions can be compared at Ratekhoj.
ICICI Bank, one of the major private sector banks in India, has cut its interest rates for NRO Fixed Deposits.
The rate for a 390 day NRO FD has gone down from 8.75% to 8.50% for deposit amounts of less than Rs. 15 lakhs. A NRO FD for a term of 590 days in ICICI now yields 8.50% down form 8.75%. A search of NRO fixed deposit interest rates for similar terms shows that there are several banks with NRO rates more than what ICICI offers. Development Credit Bank and Tamilnad Mercantile Bank give an interest of 10.00% while several banks offer more than 9.00% interest currently.
The term of 890 days has now been discontinued. In its place a new term of 990 days (which is less than 3 years) has been introduced by ICICI with a interest rate of 8.75%. A quick search of NRO FD rates for terms of 2-3 years shows that you can get better interest rates in several banks including Tamilnad Mercantile Bank yielding 10.00%.
The Indian rupee has weakened today against the US dollar to a level of Rs. 50.91/92 per dollar on increased demand for the dollar from importers as well as weaker trends in the the domestic stock markets. The rupee is however off its lowest levels of Rs. 52.20 per dollar hit in early March.
A stronger rupee helps importers but it hurts exporters of products from India.
Are you looking for 80c investment avenues for next financial year? Bank term deposits have been designated as eligible for 80c deductions from assessment year 2007-2008 onwards.
These fixed deposits have a minimum term of 5 years and you can invest a maximum of Rs 1 lakh per year under these schemes.
Attractive interest rates are offered by banks for 80c fixed deposits. Tamilnad Mercantile Bank, a private sector bank, is offering the best interest rate currently of 9.75% for non-seniors. Karnataka Bank and Lakshmi Vilas Bank, both private sector banks, are offering the next highest interest rate of 9.50%.
Tamilnad Mercantile Bank, Karnataka Bank and Lakshmi Vilas Bank are all offering 10.00% for senior citizens under the tax savings term deposit schemes and this is the best rate offered for seniors.
City Union Bank, a private sector bank in India, is offering the highest interest rate in India for fixed deposits as of March 24, 2009. It’s offering a interest rate of 10.25% for a fixed deposit period of 2-3 years for non-senior citizens.
For senior citizens, the highest interest rate offered is 10.50%. It’s offered by Development Credit Bank for a period of 1 year, Tamilnad Mercantile Bank for a period of 1-3 years, Lakshmi Vilas Bank for a deposit period of 2-3 years and City Union Bank also for a deposit period of 2-3 years. All these are private sector banks.
IDBI (term: 1100 days) and State Bank of Bikaner and Jaipur (term: 2-3 years) are offering the best interest rate of 9.25% for fixed deposits in public sector banks for non-senior citizens.
FD interest rates have been on the decline in recent months but investors can still get attractive interest rates as shown by the above rates. Compare fixed deposit interest rates here to get the highest returns for your investments.
With increasing number of Indians using online banking facilities, it’s important to make sure that our PCs are protected from the ever present threats on the Internet.
There are some golden rules you can follow for safe online banking:
- Install up-to-date anti-virus software: Anti-virus software protects you from Trojan horses. Trojan horses are typically sent to computer systems through email. They are particularly dangerous because they have the potential to allow others to gain control of your computer system remotely, without your knowledge or consent.
- Activate a pop-up blocker
- Scan your computer for spyware regularly: Spyware and adware are programs that monitor your Internet activity and potentially relay information to a disreputable source. Free spyware removal programs are available on the Internet.
- Keep your browser and operating system up-to-date with software updates: This will ensure that you have the latest security related updates and make you less vulnerable to threats.
- Use a personal firewall: Firewalls create a barrier between your computer and the rest of the Internet. A firewall can be a hardware device, a software application or a combination of the two. Firewalls can prevent malicious attacks and block certain types of data from entering your computer or private network. They can also be set up to alert you if anyone tries to access your system.
- Protect your Passwords: Keep your passwords unique for different accounts. Do not write them down anywhere. Don’t use personal details in your passwords since it makes it easier to guess.
- Sign off from your online accounts once you are done. Do not just close the browser.
- Avoid accessing your accounts from a public/shared computer.
- Use an Internet browser that supports 128-bit encryption
- Do not respond to emails asking for account related information such as passwords, account numbers etc.
HSBC has introduced a Card Protection Plan on HSBC Credit Cards. This is a 24 hour card protection service for use in the event of card loss, theft and related fraud.
The plan offers to protect all your important cards and valuable documents including all your credit, debit, ATM, membership or loyalty cards.
The plan starts at less than Rs 3 per day. For this cost, it does seem like a must-have for HSBC credit card holders to protect themselves from any kind of card loss and the potential for fraud associated with such a loss.
HSBC offers a number of credit cards and debit cards.
CPP protects your cards against fraudulent use from 7 days prior to your loss report to CPP until your card is valid.
CPP will also facilitate advances towards hotel bills and arrange for travel tickets to return home.
According to HSBC, you can also register with CPP details of important and valuable documents like passport, driving license, insurance policies, etc for easy access, should you ever need these when the originals are not around or lost. CPP also helps you getting passport loss notified, when travelling abroad.
To avail of CPP, you can call any of HSBC’s contact numbers.