It is a fact that many Indians still keep their Indian Bank accounts without converting those to Non-Resident Accounts. This is a huge blunder and against the law. When asked – NRI Should Close Indian Bank Accounts the response they give is – Don’t Know… How To Do It… When to do it? etc etc.. Here are the answers to these questions…
Should NRI close or convert their Resident Bank Accounts to Non-Resident Accounts?
If Yes, When to close or convert the Indian Bank Account to Non-Resident Account?
What is the process of closing Indian Bank Accounts or converting them to NRO or NRE Accounts?
First Question… Should you convert Resident Savings Account to Non-Resident Ordinary Account?
Just a Fact: Yes, if you continue operating a normal savings/current account while living outside the country, you would be in violation of the FEMA laws of the RBI. You should close or convert them to NRO/NRE accounts.
Many bankers & investment professionals suggest you keep SB accounts as it is and open NRI accounts in another bank. This is not legal and good advice. With the combination of NRE & NRO accounts, you can have almost the same banking when you were a resident. So be on the right side of the law. Ignorance is not a reason.
Why RBI wants you to Close or Convert Resident Account to Non-Resident Bank Accounts?
Understand this reason. A person residing abroad is the source of incoming & outgoing foreign exchange & wealth.
RBI wants to keep a check as it is their responsibility to generate statistics related to foreign assets & currency existing in India. Forex is also subject to trading. RBI has to act as a banker & also manage Rs depreciation. They can do so by having updated figures of outflow & inflow, at present & expected.
All Non-Resident Accounts – NRO & NRE have permissible debits & credits. So it differentiates money in terms of country & usage. RBI keeps a tab on Indian money & money brought in or taken from India.
When NRI Should Close Indian Bank Accounts or Convert to NR Accounts?
Should you close or convert before you move out of India? This is not necessary. RBI has also not laid any time frame for it. RBI instructions require that you inform the bank about your changed residency status “as soon as possible” without defining what “as soon as possible” means.
If you are unsure of your status (means you do not know you will be Resident or Non-resident for that year, you can leave the account as such. You should use the account for transactions. The moment you are sure you should convert or close the Indian bank accounts.
To close banks do not have a problem. But if you are converting to NRO, the bank will ask for your overseas address. There might be a situation when you do not have that. So you can wait till then.
But if you are sure of your status and have valid overseas address proof, you should do it before leaving India.
How to convert Indian Resident Accounts to Non-Resident Accounts?
Only SB Account can be converted to NRO Account. NRE account will be newly open.
The process is you should intimate the bank of your overseas residence address and the bank will ask you to re-designate the existing Savings Bank, Current Accounts & Fixed Deposits to NRO.
The process is physical and your presence is required in most cases.
With the onset of COVID, few banks have allowed this facility online but you should check with the bank. This is because not all are doing this online.
Also, few banks convert the bank to Non-Resident but do not allow accounts to be closed online. You may convert it to non-resident then and close when you get a chance to visit the branch.
Also, many banks have their international branches in most of the countries of importance. You should check these for this conversion & bank closure work.
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