If you are an NRI, the account you choose in India affects how easy it is to receive money, hold money, and move money back out later. NRE, NRO, and FCNR(B) accounts are built for different kinds of funds, so the best choice depends on where the money came from and what you want to do with it.
If your main question is repatriation, read NRI Repatriation Rules Made Simple.
The quick version
For money brought into India from outside the country.
For savings you want to keep in a permitted foreign currency.
For rent, pension, dividends, interest and other money arising in India.
That is the short version. The sections below explain the practical differences.
NRE accounts
NRE means Non-Resident External. RBI says these accounts can receive inward remittances from outside India, interest credited to the account, interest on investments, transfers from other NRE or FCNR(B) accounts, and maturity proceeds of investments made from these funds. RBI also says current income such as rent, dividend, pension, and interest can be credited here.
Money that started outside India and that you want to hold in a rupee account without losing its repatriable character.
When the account holder becomes resident again, RBI says the NRE account should be redesignated as a resident account or the funds may be transferred to an RFC account, depending on the holder's choice and eligibility.
FCNR(B) accounts
FCNR(B) means Foreign Currency Non-Resident (Bank). These are term deposits kept in a permitted foreign currency instead of rupees.
RBI says FCNR(B) deposits can run for terms of not less than one year and not more than five years. That makes them useful if you want to hold savings in foreign currency and reduce direct exposure to movements in the rupee exchange rate.
Foreign-currency savings that you can place in a term deposit rather than an everyday transaction account.
When the holder becomes resident again, RBI says FCNR(B) deposits may continue until maturity if the holder wants that. At maturity, the deposit can be converted into a resident rupee deposit or an RFC account if the holder is eligible.
NRO accounts
NRO means Non-Resident Ordinary. These accounts are meant for money that arises in India.
RBI says credits to an NRO account can include inward remittances, legitimate dues in India, and transfers from other NRO accounts. The account can also be used for local payments, transfers to other NRO accounts, and remittance of current income abroad.
Indian income such as rent, pension, dividends, interest, and other legitimate dues received in India.
The trade-off is that the balance is not as freely repatriable as NRE or FCNR(B) money. RBI says NRO balances held by NRIs and PIOs can be remitted up to USD 1 million per financial year, together with other eligible assets and subject to the applicable remittance conditions.
When the holder returns to India with the intention of staying for an uncertain period, RBI says the NRO account should be redesignated as a resident account.
How to choose the right account
The source of the money is usually the easiest way to decide.
Common mistakes
- Mixing foreign income and Indian income in the wrong account.
- Assuming NRE and NRO accounts have the same repatriation treatment.
- Forgetting to redesignate accounts after a change in residential status.
- Choosing a product before checking how the funds were earned.
Final word
The best account is the one that matches the source of the money and your residential status. NRE and FCNR(B) accounts are generally the smoother options for money linked to outside India. NRO accounts are useful for Indian income, but they come with more conditions.
The source of the money is usually the clearest guide to the account it belongs in.
If you are unsure which account fits your situation, check with your bank or a qualified adviser. For the next step, read NRI Repatriation Rules Made Simple.