FAQs on NRE deposits

Check out my introduction to NRE Deposits for additional information/links

1. People tell me that the US$ might cross Rs 55 in the next 3-6 months. Should I wait?
   • Needless to say – exchange rates depend on various factors, and it’s hard to accurately predict the future exchange rates
   • Assuming a 9% pa interest, Rs 53 will become Rs 54.2 (before taxes) in 3 months.
   • It’s your call on whether you want a guaranteed increase of Rs 2.2 (pre-tax) vs a possible increase of Rs 3+
   • Do a similar calculation if you are expecting to see a bigger change in the exchange rate
   • As I've mentioned in my introduction, exchange rate variations are the biggest risk to these FDs
2. Should I go with cumulative NRE FDs (i.e. interest get compounded)  or with standard NRE FDs (i.e. interest get paid out monthly/quarterly)
   • Factors to consider include – do you prefer keeping the interest income in INR or in US$ (consider exchange rate risks), your current vs future tax bracket
3. What time-period would you recommend, for the NRE FD?
   • Depends on your situation. With some banks (e.g. SBI) the penalty for early-withdrawal is a reduction of interest by 0.5% p.a. (which isn’t too bad)
4. How do the NRE FDs compare with the tax-free infrastructure bonds?
   • Currently, NRE FDs offer a higher interest rate (9.25% vs 8.5%)
   • Money kept in NRE FDs are easier to repatriate
   • Maximum time period of NRE FDs is 10 years, whereas some of the infrastructure bonds are for 15 years
   • Bonds can be traded before the time-period ends
   • Bonds could be sold for a premium, if interest rates decrease at a later point
   • Check out a discussion on this topic here
   • If your tax status changes to resident, you may be liable to pay Indian Income tax on the income generated from NRE deposits.
   
   

If you have additional questions, please leave a comment & I will try to respond to it.

NRE Fixed deposits - 101

With the US$/INR exchange rate at an all-time high, and banks offering 9+% interest on NRE fixed-deposits – many people are considering NRE deposits. Here’s a quick introduction to help with your decision.

1.       Differences between NRO & NRE accounts/deposits

a.       NRO deposits are tax-deductible at source by the Indian government, whereas NRE deposits are tax-free in India (but are taxable in the country of your residence)

b.      Repatriating money from NRO accounts/deposits takes non-trivial paperwork & has a limit of $250k per year. Repatriating money from NRE accounts are easier.
c.       NRO accounts can be jointly owned by resident Indians, and can be used to depost income earned in rupees

d.       I believe NRE accounts need to be closed if you move back to India?

2.       Risks with NRE/NRO deposits

a.       Exchange rate could become unfavorable (i.e., if exchange rate increases after you transfer the funds, you could lose money). Historical change of the exchange rate is here ; the rupee has to depreciate 6+% each year (on an avg) to cause siginficant losses

b.      NRE/NRO deposits are only insured for Rs 1 Lakh (unlike FDIC that covers deposits upto $250K in the US). That said, banks in India are a lot more conversative unlike their foregin counterparts.

c.       Policy changes either by the Indian or the US government
d.       At the end of the day, compare the risks of a NRE FD with the other investment choices that you have.

3.       Current interest rates & terms on NRE deposits are listed here

a.       For the past 2 weeks, rates have been changing almost every day. Check out the latest news for any updates.

4.       To open a NRE FD, you need to have an NRE account with a bank offering NRI services

a.       (Ratings &) discussion comparing various NRI banks is here

b.      Popular public-sector banks include SBI (SBI Cal may be able to help you open an account)

c.       Popular private-sector banks include HDFC, ICICI

d.      IDBI seems to offer instant & online account opening

e.      Factors to consider when selecting a NRI bank – stability of the bank, interest rates, terms for premature withdrawal , ease of withdrawal, online features, customer service, etc

5.       To fund the NRE account/deposit, you need to transfer money via one of the remittance services

a.       Ratings of various remittance/transfer services are listed here

b.      Current exchange rates offered by various remittance/transfer services are listed here

c.       Many US banks can wire funds to your NRI account directly, but the exchanges rates are typically very bad
d.      SBI NY offers a remittance service with a pre-determined and good exchange rate (though it's a little inconvenient since they rely on faxes for all transactions/paperwork).


Check out some additional FAQs here 

Healthy Indian diets....

Came across this useful book about Healthy Indian diets. This book is written by Indian doctors (in the US), with a special focus on common health problems among South Asians in the US. There’s a chapter for each major cuisine in India. At the very least, take a few minutes to read about your staple cuisine.

Some tips from the book for changes in South Indian diets...

1.      Use brown rice instead of white rice. The increase in fiber content will improve glycemic control. There is a general misconception that diabetics must avoid all rice, which is not necessary. Avoiding excess portions is the key.

2.      Instead of using rice as the main staple grain, include a variety of grains such as cracked wheat, oats, barley, quinoa, ragi and other millets.

3.      Avoid washing rice several times before cooking or cooking in excess water and draining.

4.      Keep in mind that the recommended portions are for cooked products wherever applicable. e.g.1 Serving of dhal= 2 Tbsp of uncooked dhal 1 Serving of rice = 3 Tbsp. of uncooked rice. This is important because the finished product may vary greatly in quantity and consistency!

5.      Try to cook with minimum amount of oil. Preferred oils are olive, canola or peanut oils as they are high in monounsaturated oils.

6.      While using potato, green plantain or other starchy vegetables, remember to count them as carbohydrates and cut down on rice eaten at the same meal. Smarter thing would be to select green vegetables more often than starchy ones.

7.      Use green vegetables more freely and learn to cook them in small amounts of oil. Salads are good with every meal. Simple lemon and vinegar dressings may be freely used.

8.      Switch over to fat free, skim or 1% milk instead of whole milk. This will reduce the saturated fat and calorie content of the diet.

9.      Avoid fried snack foods as much as possible; learn to cook with recipes requiring dry roasting, baking etc. Remember people with diabetes are more susceptible to high cholesterol in their blood, as well as heart disease.

10.  Use lean cuts of animal proteins (meats/poultry) and use appropriate portion sizes. Avoid using more than 3 eggs per week. Egg whites are okay.

11.  Vegetarians may increase and improve the quantity and quality of protein by incorporating soy curd (tofu), soy flour, skim milk powder, nut butters and if allowed, egg whites.

12.  Pickles, chutneys, pappadums, etc. are very high in sodium. People with hypertension must take note that table salt, baking powder, and baking soda are sources of sodium and therefore must be used carefully.

13.  Desserts must be restricted to allowed quantities of fresh fruits. Artificially sweetened low fat desserts or desserts using allowed foods with minimal amount of real sugar may be used with prudence.

14.  Drink plenty of water throughout the day, at least 6 to 8 cups a day.

15.   Learn to read the nutrition labels on food packages.

Best Indian veg food on Seattle's Eastside

Some of my favorites are listed below (in so specific order).

1. Indian-style Pizzas from CanAm Pizza (in Bellevue)
2. Gobi Manchurian & Dahi Bhalla from Kanishka (in Redmond)
3. Idli and Dosa from Sadya Palace (in Redmond). Idli & Dosa batter from Curry Point, if you prefer making it yourself.
4. Kaati Rolls from Anju's (in Kirkland)
5. Onion Kulcha, Naan (and vegetarian curries) from Pabla (in Issaquah)
6. Gulab Jamun from Punjab Sweets (in Kent)
7. Chaat and Indian Pastries from Mayuri Bakery (in Bellevue)
8. South-Indian Buffet from Udupi Cafe (in Bellevue)
9. Dosas & Paneer Tikka from Spice Route (in Bellevue)
10. Indo-chinese food from Inchin (in Redmond)
11. Mysore Bonda & Veg Biriyani from Curry Point (in Redmond)

What are some of your favorites?