InvestorQ : Are NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts prone to foreign exchange risks?
Ankit Patil made post

Are NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts prone to foreign exchange risks?

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2 years ago
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To know the answer to this question, we must understand what NRE and NRO accounts are:

An NRE account is a non-resident external rupee account which is an Indian-rupee denominated account that NRIs open. It is an account that NRIs use to transfer their foreign earnings to India and can be in the form of savings account, current account, recurring or fixed deposits.

NRO, in contrast, is the account that an NRI uses to manage his/her income earned in India. This income can be in the form of rent, dividend or even pension from abroad. The NRI can deposit as well as manage his/her accumulated rupee funds through a non-resident ordinary rupee (NRO) account.

Thus, if in case of an NRO account, if the deposit as well as the withdrawal is made in Indian rupees, there is no exchange rate risk involved. However, in case of an NRE account, your account and hence, deposits, will be prone to exchange rate risks. This is because you will be making your deposits in the currency that you earn and then based on the rate of Indian rupees against the currency you are earning in, the value of your deposits will go up or down.

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