Indian rule change may aid greater money inflows

Abu Dhabi: A new rule under India's Foreign Exchange Management Act (Fema) may usher greater money inflows into the country from Indians living overseas who would want to benefit from higher local bank interest rates on term deposits, say experts.

The Reserve Bank of India (RBI) this week relaxed foreign exchange regulations to make it possible for Indian residents to hold joint accounts with relatives holding foreign currency accounts.

"This gives non-resident Indians [NRIs] more flexibility to operate their accounts and also the resident relatives to operate the NRIs' accounts. This opens up the possibility of keeping fixed deposits in joint accounts," Sudhir Shetty, chief operating officer of UAE Exchange, a prominent money transferrer in the region told Gulf News. He said the fixed-term deposits in India yield comparatively higher returns, which could woo the NRI community to remit more money home on a regular basis.

"Most certainly, this RBI move would enable greater inflows into India due to more flexibility in the hands of the account holder in the managing of the account," said a senior Abu Dhabi-based banker.

Guidelines

Banks in India are currently offering more than 9 per cent interest on a one-year deposit. The yields on a similar period fixed-term deposit in the UAE, on the average, is under 3 per cent.

The amendment to the Foreign Exchange Management Act 2000 also allows close resident relatives of NRIs to repay housing and other rupee-denominated loans on behalf of NRIs.

Under amended guidelines, NRIs can open either a non-resident external or a foreign currency non-resident account with their resident close relatives. The resident relative is eligible to operate the account as a power of attorney holder in accordance with existing instructions during the lifetime of the non-resident relative.

At the same time, NRIs have been allowed to include non-resident close relatives as joint holders in their resident bank accounts.

However, such non-resident Indian close relatives are not allowed to operate the account during the lifetime of the resident account holder. Similarly, changes have been made in the case of foreign exchange earners' foreign currency account and resident foreign currency accounts. The easing of norms follows suggestions from a panel of bankers.