GS Paper-3
Syllabus: Indian Economy
Context:
RBI easing norms may arrest outflows from NRE accounts
Steps taken in Recent times to arrest the rupee slide against dollars
- India has eased rules for foreign investors to invest in Indian debt instruments
- Temporarily removed CRR, SLR and Interest rate cap on the interest rate on NRE deposits: Reserve Bank has eased norms governing the Foreign Currency Non-Resident Bank [FCNR(B)] and Non-resident External (NRE) deposits. Banks will be able to offer higher returns to NRIs on their deposits.
- This will increase NRI investment and thus help reduce the slide of the Indian rupee.
About NRE accout:
NRIs can open an NRE account – introduced in 1970 — with funds remitted to India through a bank abroad. This is a repatriable account and transfer from another NRE account or FCNR(B) account is also permitted.
About NRO account:
NRO accounts may be opened / maintained in the form of savings, recurring or fixed deposit accounts. These are Rupee accounts opened for the purpose of depositing income earned in India. These accounts can be held jointly with NRI / resident Indians.
About FCNR account:
An FCNR account is a term deposit account that can be maintained by NRIs and PIOs in foreign currency. Thus, FCNRs are not savings accounts but fixed deposit accounts.
What is difference between NRE and NRO account?
An NRE account is a bank account opened in India in the name of an NRI, to park his foreign earnings; whereas, an NRO account is a bank account opened in India in the name of an NRI, to manage the income earned by him in India. These incomes include rent, dividend, pension, interest, etc.
Insta links
Practice Question:
Q. The falling value of the rupee will lead to several problems in the Indian economy. Examine the causes of the problem and suggest steps to deal with this challenge? (250 words)
Q. consider the following:
1. Foreign currency convertible bonds
2. Foreign institutional investment with certain conditions
3. Global depository receipts
4. Non-resident external deposits
Which of the above can be included in Foreign Direct Investments?
- 1, 2 and 3
- 3 Only
- 3 Only
- 1 and 4
Answer: A
Statement 4 is incorrect.
A Non-Resident External (NRE) account is a rupee-dominated account opened by an NRI to facilitate the deposit of foreign currency earnings. It is not an FDI.
Source: Indian Express
