Explained: Why NRIs must either close or convert their Indian bank accounts (2024)

The moment your residential status changes to being an NRI, a lot of things change for you. From your bank accounts to property holdings, a different set of rules start governing your personal finances. There’s usually so much to deal with that closing the bank accounts usually figures last on anyone’s list. After you move to a new country, you open new accounts with local banks. Your INR accounts are usually left gathering dust.

You try searching for solutions for closing the account on the bank's website, but it’s of no help. You try speaking to your branch for getting that account closed. That isn’t of much help either. You would usually be asked to convert those accounts into NRO/NRE accounts.

After some research, you usually give up and your account turns inactive. Here are a few ways to make the process simpler and effective. A few questions for starters:

- Do you need to close the account if you leave the country?

- Can you close your bank account online?

- What happens if you don’t close your bank account?

Also read | COVID crisis: Money matters NRIs must fix before returning to India for good

Do you need to close the account if you leave the country?

The answer to that question is ‘no’. You can reside in one country and continue operating a bank account in India. You would be required to intimate the Bank of change in your residence, after which the bank will ask you to convert the account from INR to NRO/NRE/SNRR.

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. To put it simply, this is because RBI wants to keep track of all the accounts where the money is being repatriated.

So is there any time frame for you to either convert your account or to close that account? Well, there isn’t a time frame per se, but then you wouldn’t want to be messing with the regulator.

What should you do if your account is still lying unused/inactive back home?

The best strategy would be to close that account since there’s a cost associated with maintaining a bank account. Also, there are compliance issues (complication in tax filings) with maintaining multiple accounts which all culminate in streamlining your Bank accounts.

Also read: Keep your bank account adequately funded to avoid penalties

Can you close your bank account online?

Unfortunately, there’s no straight answer to this. With the ongoing pandemic, a few banks have adopted digital means of communications. We know for sure that digital KYC verification is working fine for account opening and updation, so we hope it’s working equally well for account closure.

If that doesn’t work, there’s one shortcut that should work with most of the Private Sector Banks.

You could first get your INR account converted to an NRE/NRO account, and then after a few days ask them to close this account.

Why does this work? Banks understand that customers having an NRE/NRO account aren’t residing in the country and therefore are more prone to communicating digitally. Most Banks have a separate desk for dealing with NRE/NRO account holders and there is an established line of communication.

Disclaimer: In case your account is inactive/dormant, you would first have to get that account activated. This can be done by submitting a self-declaration through a registered email ID, a postal letter, net or mobile banking. Which leads us to our last question.

What happens if you don’t close your Bank account?

Well, there are 2 consequences of your inaction towards these accounts

-You would be in breach of FEMA guidelines

-You would be bearing unnecessary fees/charges for maintaining this account

Many of us don’t want to get the account closed for the simple reason that it is hard to deal with the bank for closure. In case you are looking for ways to keep your account active with minimal effort, there are four extremely simple ways to do it. These would require almost zero effort from your side.

These are :

-Link your Bank account for some of your regular payments (EMI, rentals, etc.)

-Invest in a fixed deposit from the account, credit of regular interest payments will keep your account active

-Debit/Credit a bare minimum amount (even INR 50-100 would do) at least once a year

-In case you’re receiving money from someone, ask them to transfer the money in this account (also, it helps you save money since you don’t use this account often).

Shavir Bansal is the Founder and CEO of Kifaayat

first published: Jun 7, 2021 09:07 am