Two types of rupee accounts viz. Non Resident (external) Rupee Accounts (NRE) and Ordinary Rupee Accounts (NRO) are permitted to be maintained by NRIs. Funds in NRE Account are repatriable.
NRO A/C.: A NRO bank account is an ordinary saving bank account opened for NRIs. This is why it is known as Non-Resident Ordinary account. The funds, standing to the credit of this account, cannot be repatriated outside India in foreign exchange, without prior permission of RBI. Interest, earned on these accounts, is, however, eligible for repatriation outside India, net of Indian taxes. The remittance of interest (net of taxes) will be permitted by the authorized dealer where the account is maintained, on an application in the prescribed form by the NRINRIs can open NRO account for transactions in rupees without any approval. NRO account can be maintained in the nature of current, savings, recurring or fixed deposit account. NRIs may also open this account jointly with residents. After the NRI returns to India permanently, this account can be again designated as a resident account.
NRE A/C.: A NRE bank account is an external saving bank account opened for Non resident Indians. NRE account may be opened without any approval if the funds for this account are transferred in freely convertible foreign currency. The funds, standing to the credit of this account, as well as interest earned thereon, are repatriable outside India in free foreign exchange, without permission of the RBI. The interest income is not subject to Indian Income-tax. Credits to the accounts should be in the form of remittance in foreign exchange from outside India, as well as other funds, which are eligible to be remitted outside India, in free foreign exchange. Funds emanating from local sources are not eligible to be credited to these accounts, unless these funds are otherwise remittable outside India, in terms of the existing Exchange Control Regulations. NRIs may jointly open this account with another NRI. This account can be maintained in the form of saving or current or recurring or fixed deposit account.