RBI allows short-term fund transfers from non-resident rupee account to NRE account
07 May 2012
The Reserve Bank of India (RBI) has allowed non-resident Indians to transfer repatriable funds from their non-resident ordinary rupee accounts to non-resident external accounts in India, even for short durations, in a bid to boost overseas fund flows.
The decision follows recommendations by a committee appointed by the RBI to review the facilities for individuals under the Foreign Exchange Management Act (FEMA), 1999.
The committee headed by K J Udeshi, has recommended that the NRIs / PIOs may be permitted, subject to payment of applicable taxes, to transfer repatriable funds from their NRO account, for credit to their NRE accounts in India, within an overall ceiling of $1 million per financial year.
At present, transfer of funds from NRO account to NRE account is not permissible.
RBI said, on a review, it has now decided to henceforth allow NRIs to transfer funds from NRO account to NRE account within the overall ceiling of $1 million per financial year, subject to payment of tax as applicable (ie, as applicable if funds were remitted abroad). Such credit of funds to NRE account will be treated as eligible credit under FEMA regulations, RBI said.
RBI has advised authorised dealer banks and authorised banks to bring the changes in regulations to the notice of their constituents and customers.