Regulations 1 to 5 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The Deposit Regulations begin with a ban on deposits between a person resident in India and a person resident outside India, then list exemptions and the accounts an Authorised Dealer may open. Schedules 1 and 2 are the NRE and FCNR(B) schemes. The Master Direction on Deposits and Accounts gives the conditions a bank applies, and this article states each condition as the Master Direction prints it.
This article reads the Foreign Exchange Management (Deposit) Regulations, 2016 (Notification No. FEMA 5(R)/2016-RB, G.S.R. 389(E), 1-4-2016) for structure, as per the copy consulted, a third-party print as notified with no amendment notes, with the Fifth Amendment Regulations of January 14, 2025 and the Sixth of June 18, 2026. Every condition is taken from the Master Direction - Deposits and Accounts, updated as on September 02, 2026. Regulation 3 bars a resident from accepting a deposit from, or making one with, a non-resident, save as the Act, Regulations and directions allow. An NRE account may be kept by an NRI or PIO in any form; an FCNR(B) account only as a fixed deposit. Changes after the stated dates should be checked.
Authority and the texts
The preamble cites "clause (f) of sub-section (3) of section 6, sub-section (2) of section 47" of the Foreign Exchange Management Act, 1999. The Act text now prints section 6(3) as omitted, and section 47(3) keeps earlier Reserve Bank regulations in force until they are amended or rescinded. See the Act articles on section 6 and sections 47 and 48. The Master Direction is the Reserve Bank's direction to authorised dealers and authorised banks under section 11; its cover letter says deposits between residents and non-residents are regulated "in terms of sub-section (3) of section 6" read with the 2016 Regulations. The copy of the Regulations pre-dates several amendments. The Master Direction's appendix lists amendments of November 9, 2018, July 16, 2019 and November 13, 2019 that are not in the sources consulted. Where the copy and the Master Direction differ, the Master Direction is read. For the tax filing of an NRI, see our NRI tax filing service and income-tax guides.
Regulations 1 and 2: title and definitions
Regulation 1 gives the title and brings the Regulations into force from publication, except sub-regulation (2) of regulation 7, deemed in force from 21st January, 2016. Regulation 2 defines "Authorised bank" (a bank including a co-operative bank, other than an authorised dealer, authorised to maintain an account of a person resident outside India), "Deposit" (money with a bank, company, proprietary concern, partnership firm, corporate body, trust or any other person), "NRI" (a person resident outside India who is a citizen of India) and "Person of Indian Origin", which includes an Overseas Citizen of India cardholder. The Sixth Amendment inserted a definition of "International Financial Services Centre" (IFSC). Paragraph 2.8 of the Master Direction records that the 2016 Regulations replaced the 2000 Regulations from April 1, 2016, and that the term NRI wherever it appeared has been replaced by NRI and/or PIO.
Regulation 3: the ban and its exception
Save as otherwise provided in the Act, Regulations, or rules, directions and orders under the Act, no person resident in India shall accept any deposit from, or make any deposit with, a person resident outside India. The proviso lets the Reserve Bank, on an application and on being satisfied that it is necessary, allow a resident to accept or make such a deposit. Paragraph 1.1 of the Master Direction (Part II) repeats that the Act empowers the Reserve Bank to restrict, regulate and prohibit deposits between residents and non-residents.
Regulation 4: exemptions
Nothing in the Regulations applies to: rupee accounts of foreign diplomatic missions and diplomatic personnel; foreign currency accounts of diplomatic missions, diplomatic personnel and non-diplomatic staff who are nationals of the concerned foreign countries and hold official passports, on conditions; rupee accounts of persons resident in Nepal and Bhutan; and accounts of multilateral organisations of which India is a member. Paragraph 3 of the Master Direction states the same exemptions (it lists the diplomatic rupee and foreign currency accounts, Nepal and Bhutan, and multilateral organisations). For the diplomatic foreign currency accounts it prints five conditions: credits only by inward remittances through banking channels and by transfer from the mission's rupee account of visa fees; funds converted to rupees cannot be converted back; the form of account (current or term deposit, and savings for personnel and staff); interest determined by the authorised dealer; and repatriation without the Reserve Bank's approval.
Regulation 5 and regulation 8: who may take deposits
Under regulation 5, an authorised dealer may accept deposits under the NRE scheme (Schedule 1) and the FCNR(B) scheme (Schedule 2) from a non-resident Indian, and under the NRO scheme (Schedule 3) from any person resident outside India. Authorised banks may also take NRE and NRO deposits, and Regional Rural Banks FCNR(B), on the Reserve Bank's conditions. Regulation 5(4), as substituted by the Sixth Amendment (June 18, 2026), lets any person resident outside India open an SNRR account with an authorised dealer in India or its branch outside India, including in an IFSC. The Fifth Amendment (January 14, 2025) added a new regulation 9 allowing transfer of funds, for all bona fide transactions, between repatriable rupee accounts; paragraph 14 of Part II of the Master Direction says the same. Regulation 8 and paragraph 13 let authorised dealers provide nomination for individual account holders.
Schedule 1: NRE account (Master Direction paragraph 4)
| Feature | As the Master Direction prints it |
|---|---|
| Who | NRIs and PIOs may open and maintain these accounts with authorised dealers and banks authorised by the Reserve Bank, including co-operative banks |
| Form | Any form: savings, current, recurring or fixed deposit |
| Joint accounts | By two or more NRIs and/or PIOs, or an NRI or PIO with a resident relative on "former or survivor" basis; during the account holder's lifetime the resident relative can operate only as Power of Attorney holder |
| Remittances | Inward remittances to the account, and remittances outside India from it, are permitted |
| Credits | Interest, interest on investment, transfers from other NRE or FCNR(B) accounts, maturity proceeds of investments made from the account or through inward remittance; current income such as rent, dividend, pension and interest where the authorised dealer is satisfied it is current income of the holder and tax has been dealt with; transfer from an NRO account within the limit in regulation 4 of the Remittance of Assets Regulations, 2016 |
| Debits | Local disbursements, transfers to other NRE or FCNR(B) accounts, and investments in India |
| Loans | Against NRE funds, to the holder or a third party in India, without any limits subject to usual margin requirements; not repatriable; for personal or business purposes (not relending, agriculture or plantation, or real estate business), non-repatriation capital contribution, or acquiring a flat or house for own residence; for third-party loans there must be no direct or indirect foreign exchange consideration for the depositor; premature withdrawal not available where loans are availed |
| Change of status | On return to India for employment or change in residential status the account is designated as a resident account, or funds move to an RFC account, at the holder's option |
| Death | Balances can be transferred to the non-resident nominee; a resident nominee's request for remittance goes to the Reserve Bank |
| Power of Attorney | Operations limited to local payments or remittance to the holder; the holder may not open a NRE account, repatriate to others, gift to a resident or transfer to another NRE account |
| Interest and tenor | As the Reserve Bank's Department of Banking Regulation directs |
Income tax and wealth tax statements in paragraph 4.12 are a tax subject; see our income-tax guides.
Schedule 2: FCNR(B) account (Master Direction paragraph 5)
NRIs and PIOs may open and maintain these accounts with authorised dealers and banks authorised by the Reserve Bank. Deposits may be accepted in any permissible currency. The accounts can be kept only as fixed deposits. Credits and debits, joint accounts, loans and overdrafts, and operation by power of attorney are as for an NRE account. Interest and tenor follow the Department of Banking Regulation's directions. The copy of the Regulations carries more detail in Schedule 2 (designated currencies, conversion rates, inland movement of funds, payment of interest and reporting); those conditions are left out here because the Master Direction does not print them.
Example
Priya Menon, an NRI, opens an NRE savings account with her sister, a resident, on former or survivor basis. During Priya's lifetime the sister can operate it only as her Power of Attorney holder, limited to local payments or remittance to Priya. Priya pledges the balance to raise a loan for acquiring a flat in India for her own residence; the loan cannot be repatriated, and premature withdrawal of the deposit is not available while it stands. When she returns for employment, the account is designated resident or the funds move to an RFC account, at her option. A separate FCNR(B) fixed deposit in a permissible currency would follow the same loan and joint-account conditions, and its interest is set under the Department of Banking Regulation's directions.
Our guides on NRI accounts, the NRE account and the FCNR account give wider context. The NRO and other schemes are in the next article. Later amendments and circulars should be checked.
Need help with NRI accounts?
Choosing between NRE and FCNR(B), and moving funds between accounts on a change of residence, has tax as well as exchange-control consequences. Our NRI tax filing team looks at both.
Key takeaways
- Regulation 3 bars deposits between residents and non-residents unless the Act, Regulations or directions allow; the Reserve Bank may allow on application.
- NRE: NRIs and PIOs, any form, loans without limits on usual margin, funds not repatriable if borrowed.
- FCNR(B): fixed deposits only, in any permissible currency; other conditions as for NRE.
- A Fifth Amendment regulation 9 permits transfers between repatriable rupee accounts for bona fide transactions.
- Where the copy and the Master Direction differ, the Master Direction is followed.
Read next
- NRO, SNRR, escrow and company deposits: Schedules 3 to 7
- NRI and OCI investment in bonds and government securities
- NRI accounts: NRE, NRO and FCNR
- NRE account vs NRO account: key differences
Disclaimer: Based on the rules, regulations and Reserve Bank Master Directions under the Foreign Exchange Management Act, 1999 that this article names, each in the version and up to the date stated in the article, as consulted on 2 October 2026. Some texts are third-party copies or older prints and are identified as such. Limits, forms and time limits change by amendment and circular; later changes should be checked on the Reserve Bank and Gazette sites. This article is general information, not legal advice; check the official text before acting.