RBI in its Statement on Developmental and Regulatory Policies, on Friday, October 4, 2019, announced that the scope of non-interest bearing Special Non-resident Rupee (SNRR) Account being enhanced. The statement said that in consultation with the Government, it is decided by RBI to permit persons resident outside India to open SNRR accounts, facilitating Rupee denominated ECB, trade credit and trade invoicing. Further, it is decided to remove the restriction on the tenure of a maximum of 7 years for SNRR accounts. As per existing rules, no operations are permissible in the account after seven years from the date of opening of the account. The Central Bank communiqué said that guidelines in this regard would be issued within a month.
What is an SNRR account?
The SNRR account can be opened by any person resident outside India, having a business interest in India, with an AD bank for the purpose of putting through bona fide transactions in rupees, with the nomenclature of the specific business for which it is in operation. The funds available in SNRR account cannot be used for foreign exchange to any person resident in India against reimbursement in rupees or in any other manner. The transactions in the account restricted to specific/ incidental to the business proposed to be done by the account holder. All transactions in the SNRR account will be subject to payment of applicable taxes in India and in accordance with the provisions of the Act, rules, and regulations made thereunder. Transfer of amount from NRO account to SNRR account is prohibited. All the operations in the SNRR account should be in accordance with the provisions of the Act, rules, and regulations made thereunder. The balance maintained in the account should be commensurate with the business operations of the account holder.
SNRR account may be designated as resident Rupee account on the account holder becoming a resident. The amount due/ payable to a non-resident nominee from the account of a deceased account holder shall be credited to the NRO account of the nominee with an authorised dealer/ authorised bank in India. Opening of SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh requires prior approval of Reserve Bank.
The difference between SNRR and NRO account:
An NRO account earns interest on the deposit whereas SNRR can be held only as a non-interest earning account. The balance in the SNRR account is repatriable, whereas balances in an NRO account are non-repatriable (except for current income and to the extent permissible for NRIs/ PIOs under FEMA 13(R)). The NRO account holder may remit an amount up to USD one million per financial year, out of balances held in his NRO rupee account for all bonafide purposes.