NRE, or non-residential external, account is a type of savings account that NRIs or non-resident Indians have to open in India. This is in accordance with the Foreign Exchange Management Act (FEMA) guidelines that makes it illegal for NRIs to have saving accounts in their name in India.

Thus, all NRIs have to convert the money they earn abroad to an NRE or NRO, non-resident ordinary rupee (NRO) account.

If an NRI doesn’t open an NRE or NRO account, then he/she will have to pay hefty penalties on the savings account he/she continues to hold in India.