Can A Non Resident Indian Open Normal Bank Account or FDs in India?

I just saw question on FD by NRI in nationalized banks. I have further question- as an NRI can I make investment in FD with indian banks like SBI, ICICIBank through normal banking account or do I have to make FD only through some NRI account only? I guess that by convering my account into NRI accout the rate of interest on them would be severely reduced. Is there any penalty if I miss to covert my normal accounts into NRI accounts? Amit Mishra , New York

An NRI can not open a normal bank account . In fact , as per RBI guidelines, the meoment a resident becaomes Non Resident, his normal bank account has to be converted in Non Resident (Ordinary ) Account (NRO) . Please read Master Circular of RBI , Point 9 which states as under

9. Change of resident status of account holder

When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as a non- resident (ordinary) account.When a person resident in India leaves for Nepal or Bhutan for taking up employment or for carrying on business or vocationor for any other purposes indicating his intention to stay in Nepal or Bhutan for an uncertain period, his existing account will continue as a resident account. Such account should not be designated as Non-Resident (Ordinary) Account (NRO).

What about FD ?

Similaraly , the Fixed Deposits are also opened for an NRI from these NRO accounts only and their interest rate is also regulatated differently. The same master circular states as under

NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. Rate of interest applicable to these accounts and guidelines for opening, operating and maintenance of such accounts shall be  in accordance with directives/instructions issued by Reserve Bank from time to time.

In nut shell , an NRI can not open a normal Fixed Deposit which a resident Indian can open.

You can get  the master circular here .