The Reserve Bank of India has allowed non-resident Indians (NRIs) to transfer funds from non-resident ordinary (NRO) account to Non-Resident External (NRE) account subject to a ceiling of $1 million in a financial year.

While an NRE account is for depositing income from abroad, NRO account is mainly for putting Indian incomes. In case of NRE account, only NRIs can become joint account holders, but for NRO account both resident and non-resident can become joint account holders.

"On a review, it has been decided that henceforth NRI... shall be eligible to transfer funds from NRO account to NRE account from within the overall ceiling of USD 1 million per financial year subject to payment of tax," RBI said.

The decision came after KJ Udeshi committee recommendation to facilitate persons under Foreign Exchange Management Act (FEMA), 1999, it said. As per the existing regulation, fund transfer from NRE account to NRO was allowed, but not the other way round.

"At present transfer of funds from NRO to NRE account is not permissible," the RBI notification said.

The decision was taken based on recommendations of KJ Udeshi Committee, which reviewed the facilities for persons under Foreign Exchange Management Act, 1999.