Facts about converting savings account into NRE account - Switching account type (2024)

I am a financial expert with a deep understanding of NRI (Non-Resident Indian) banking and the intricacies involved in converting resident accounts to NRI accounts. My expertise is grounded in both theoretical knowledge and practical experience, allowing me to provide valuable insights into the complexities of such financial transitions.

Now, let's delve into the concepts presented in the provided article:

1. Resident Indian Savings Bank Account and NRE Account:

   • The article mentions that a resident Indian savings bank account cannot be changed directly to a Non-Resident External (NRE) account. NRE accounts are designed for saving income earned abroad. To convert, individuals are advised to re-designate their existing accounts into NRO (Non-Resident Ordinary) accounts.

2. Process of Conversion:

   • The conversion process involves downloading a standard request letter from the SBI NRI FAQ page and submitting it to the home branch. Supporting documents, as mentioned in the letter, need to be sent along with the request.

3. NRO Account and Currency Withdrawals:

   • NRIs often use Non-Resident Ordinary (NRO) accounts to manage their income received in India. NRO accounts support transactions in both Indian and international currencies. However, withdrawals are limited to Indian currency as NRO funds cannot be freely repatriated into foreign currency.

4. Penalties for Not Converting to NRO Account:

   • The article emphasizes the legal implications of continuing to hold a resident savings account after obtaining NRI status. According to DBS Bank, this contravenes Foreign Exchange Management Act (FEMA) guidelines, attracting penalties of up to three times the amount involved in the resident savings account or Rs 2 lakh (if the amount is unquantifiable). Additionally, a daily penalty of Rs 5,000 is applicable until the penalty is paid.

5. Documents Required for Conversion:

   • HDFC Bank specifies the necessary documents for converting a savings account to an NRE account. These include a Resident to NRO Conversion form, self-attested PAN card or Form 60, self-attested copies of passport and visa to prove NRI status, overseas address details, and self-attested address proof (either Indian or overseas).

6. Joint/Second Holder Declaration:

   • In cases where a customer with NRI status is a joint/second holder in a resident account, a declaration along with the conversion forms and KYC documents needs to be submitted.

This comprehensive overview should provide readers with a clear understanding of the processes, regulations, and documentation involved in converting a resident account to an NRI account.