FLAME Newsletter - June 13, 2012


“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.” - Charles Darwin.

If you are an Indian who is planning to settle abroad for education or work, this adage will definitely hold true for you. Even if you are an Indian who is settled abroad and wishes to return to India, you will need to adapt to a lot of changes.

In the rush of completing your formalities for the big shift, you might just overlook some imperative tasks to be completed.  Finances and investments are some areas that suffer in our rush to make sure everything is in place.

To make matters simpler, refer the checklist mentioned below to ensure that all your paperwork is taken care of…

Financial steps to be taken before you turn an NRI

If you are going to be a Non Resident Indian (NRI) soon due to a shift in jobs or any other reason, there are some formalities you need to complete. Apart for dealing with the emotional stress of leaving your friends and family behind, you also need to settle some official and financial matters. Making arrangements for your finances is imperative before you leave the country.

NRE and NRO accounts

First, you need to change your savings bank account to an NRO or NRE account. The NRO account is for depositing all your income from India. The incomes can come from rent and interests earned. If you need to pay EMIs then you can issue cheque from the country you are in at present. However, there are some restrictions when you try to transfer the money to the country you are located in at present. All the income from India can be transferred to you only if it is less than $1 million per year.

The NRE account can be opened with foreign money. There is no restriction of upper limit but the interest rates are low. Opening these accounts is simple and you must have one such account before you leave.

Demat account   

You cannot use your existing Dematerialized (demat), account once you become an NRI. You have to open a new NRO demat account. Once you are an NRI, your investment amount in Indian company shares will be restricted. Thus, you need the new demat account to carry out transactions. Opening this demat account is easy and your demat account service provider will guide you. If you ever come back to India for good, you can close this demat account.

Power of Attorney

You need someone trusted to manage all your transactions within India for which, you need to give him, or her, the Power of Attorney. It is always better for you to choose a family member to act on your behalf.  You can always restrict the power entrusted by choosing specific transactions they are authorized to carry out.  

Updating KYC

You must submit updated Know Your Customer (KYC) forms to the bank, insurance company and mutual fund house where you have your investments. Update your status as an NRI and the institutes will help you with all the new procedures you will need to follow.

Now that you have got all your paperwork in place, you can make use of the following when you plan to invest…

Investment Tips for NRIs

The Indian economy has always been characteristically a fast paced developing and emerging market. As an Indian living abroad, it often makes good business sense to make wise investments back at home. Whether you are an Indian who is pursuing a dream job abroad and wishes to settle back in India post retirement or you are an Indian who has parents living on their own in India, and are dependent on you for monetary support, timely action can help you achieve your investment goals.


First things first, starting early is very important. The younger you are, and the earlier you start saving money, the faster you can build a corpus which will support your financial needs.

Depending on the immediate needs, an NRI can either invest in the equity market in India or alternatively build a portfolio with three to four medium-term mutual funds. An equity investment done wisely can fetch long-term returns taking into account the inflation factor. Years later when the NRI investor decides to take out the invested money, he will definitely have more than what one would have got with a paltry interest in a savings or fixed deposit account. However, if the goal is to send out monthly remittances back home to your parents then investing in a monthly income scheme like a mutual fund would make more sense which can earn monthly dividends.

Apart from the above, an NRI can also use a part of one's savings to frequently invest in gold or real estate in India. When you are back in India, these assets will help you gain a comfortable foot hold and make your retirement life far less stressful.

Remember the key is to invest early on and to invest with a goal in mind. Jumping into various investment instruments without taking into account your short/long-term goals would be counterproductive, since the benefits of a particular scheme which for example work well for a short term perspective, might not after all be a prudent choice for long-term gains. So diversify try to diversify your portfolio, and invest in SIPs or Equity as per your needs and invest frequently in long-term assets like real estate and gold.


The US Census Bureau has pegged the average Indian American family annual income at $60,000 as against the national average of $38,885. Despite the recession, the dotcom bubble burst and the tech boom meltdown, the estimated annual purchasing power of Indian Americans stands at $20 billion.



While the Index of Industrial Production for April showcased a virtual stalling of our manufacturing activities, investors and industry experts seem to have seen a brighter side. As growth continues to suffer, the expectation that the Reserve Bank of India would, in its policy meeting on June 18, cut key interest rates to spur growth. Let us hope that monthly inflation data for May due on Thursday only reaffirms the expectation. 

India's industrial output stalls in April


Hypothecation means the pledging of securities as collateral for a loan. The said security is said to be hypothecated.


FLAME (Financial Literacy Agenda for Mass Empowerment) is an IIFL initiative to promote financial literacy amongst the masses in order to make them an integral part of India's spectacular growth story.

In an era of accelerating GDP and rising per capita growth, financial literacy has become more critical than ever before such that we all reap the tangible benefits of the nation's economic prosperity. Financial inclusion has been quite high on the governmental agenda, given its emphasis on widening the Banking & Financial services network across the country. IIFL's FLAME initiative stands committed to complement this effort by helping common people gain financial growth and security though better awareness and education on the variety of financial products while avoiding the lure of and loss from unrealistic claims made by unscrupulous agents and ponzi schemes.

Our objective is to light a FLAME, as the name suggests, which will set ablaze a chain of FLAMEs across the country. The new-found light of knowledge will undoubtedly dispel the dark clouds of financial illiteracy and ensure the bright sunshine of financial growth and prosperity.

 This portal is but one of the various IIFL initiatives that would be part of FLAME.

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