NRI Banking – Procedural Hassles

If you have the right type of procedures, systems, rules and regulations, which concern the clients, half the battle is won by an organization. I remember the words of the Managing Director of a company, at the time of inaugurating the staff training college for his officials and employees. As he cut the ribbon (red in color) he said, “I have great pleasure in cutting this tape—such ‘red tapes’ are great obstructions for the smooth and fast development of any industry”. If the procedures are straight, not cumbersome and time-consuming, most of the liaison officers that the industrial establishments are compelled to engage, will be rendered unemployed!

This essay deals with procedural hassles in the Banking Industry. All the rules concerning accounts and remittances or any issue related to the funds of NRIs are drafted by the Reserve Bank of India (which is the Central Banking Authority of the country, governed by the Board of Directors and answerable only to the Financed Ministry of Government of India) and their implementation is carried out by the foreign exchange designated branches of commercial banks.

Reserve Bank-operates sitting on the ivory tower…

The root cause of the problem lies here. The rules are framed by the theoreticians of Reserve Bank of India, who have little experience of the grass root level realities of the world of commercial bank and the issues in dealing with the customers. Reserve Bank Officials possess the knowledge of banking through text books of economics and banking, and they have never been exposed to the realities across the counter in the commercial banks. I make this statement with full responsibility, having worked in Reserve bank of India for about 8 years and with a decade’s experience in Managerial positions in commercial banks.

I consider, working in the Reserve Bank, and issuing instructions from the air-conditioned chambers is easiest of the banking jobs. The implementing official/clerk at the counter who has to answer and satisfy hundreds of customers daily, in a commercial bank, know what it means to work under tremendous pressure. To deal with the NRIs, needs special skills and great patience.

Send the Reserve Bank staff on deputation

I am inclined to make a suggestion that at least 20% of the staff of Foreign Exchange Department of Reserve Bank of India should be posted on deputation basis in various commercial bank branches in metropolitan, urban and semi-urban centers for a minimum period of one year so that they have the firsthand experience of dealing with the NRIs and their input will be of great help to the framers of policy for conducting the banking affairs of NRIs. The problems faced by NRIs are mainly on two counts—remittance of money to their own country and maintenance of demat accounts.

Noble intentions alone will not do

The intentions of the Reserve Bank are noble. Its inclination is to give genuine incentives to NRIs to encourage the arrival of capital into India is unquestionable. The funds are deposited in Non-Resident External Accounts, with the facility of total convertibility as for their investments and also the profits earned through them. The account holders are allowed to remit abroad up to $1 million in one year. The main thaw here is that the authorities do not differentiate and treat individual and business accounts in an identical manner. Is it not a fact that the issues with the businessmen and individuals are mostly different? But the Reserve Bank of India doesn’t take cognizance of this fact.  This indicates lack of maturity on the part of the policy makers.

The NRIs are also required to give a complex declaration attested by a chartered accountant. The wording of the declaration hurts the dignity of the NRIS. Even though this declaration is later deleted, some banks are still insisting for it. This shows the lack of proper interaction between Reserve Bank and Commercial Banks or within different departments of Commercial Bank itself. The instructions issued are not percolated down to the implementing level, and clients thus suffer.

NRI Demat Accounts

For purchases of mutual funds/shares from the funds of the NRIs, and remittances there from, the concerned individual is required to open a separate dedicated NRO account linked to the demat account. Some of the cumbersome instructions issued by Reserve Bank of India in 2001 are still in operation in the year 2010! A permanent working group consisting of RBI, SEBI, Finance Ministry of Govt. of India, and representatives of the Commercial Banks should be constituted and it should publish latest instructions on operation of NRI accounts, in the form of a booklet, once in six months. The latest edition of such a booklet should be in cancellation /supersession of all the previous instructions issued.

A NRI will be happy to buy and own such a handout, even if it is priced, so that one is clear about the procedures of opening and operating NRI accounts and to and from remittances.

The booklet should be available at all the designated branches of commercial banks authorized to deal in   Foreign Exchange.