Indian Expats Face Credit Card Squeeze as Banks Tighten Rules on Overseas Accounts

Moin Ladha, a partner at Khaitan & Co, put it plainly: international banks are growing reluctant to offer credit cards linked to offshore accounts held by Indian residents, even when regulations technically permit such cards. The reason is not creditworthiness. It is India’s 180-day rule.

That rule, embedded in the Foreign Exchange Management Act, requires resident Indians to deploy or remit unused foreign currency back to India within 180 days of acquiring it. Money left sitting in an overseas account, even in a fixed deposit, may not satisfy the requirement. Banks in Zurich, Singapore, London and parts of West Asia have begun reassessing credit cards tied to such accounts, according to the Economic Times. The question now spreading across the Gulf is whether the same restrictions could reach the millions of Non-Resident Indians working and saving in the UAE.

For most NRIs in the Emirates, the answer is no.

The distinction rests on residency, not nationality. Under FEMA, a person resident outside India can keep salary, business income and savings in UAE bank accounts without any obligation to spend, invest or remit the money within 180 days. An Indian passport does not change that. Income earned in Dubai or Abu Dhabi is not treated as a remittance simply because the account holder was born in India.

The 180-day clock applies to India’s Liberalised Remittance Scheme, which allows resident individuals to send up to $250,000 per financial year abroad for permitted purposes: travel, education, medical treatment, overseas investments and property purchases. The constraint is specific. If a resident Indian remits funds to buy overseas securities and the transaction falls through, the money cannot sit idle indefinitely. It must return to India within the prescribed period. Keeping funds in a foreign current account or savings account does not count as deploying them for an eligible purpose. Actual spending on airline tickets, hotel stays or securities purchases would.

A UAE-based NRI earning a salary in the Emirates faces none of that. Those earnings can remain in a UAE current account, savings account or fixed deposit for as long as the account holder chooses.

Meanwhile, Ladha told the Economic Times that the practical consequence for resident Indians is already visible. “Residents have limited flexibility to retain meaningful balances overseas, making some international banks reluctant to offer credit cards linked to these accounts, even though regulations recognise use of such cards.” Foreign-issued credit cards allow customers to pay expenses in the same currency as their offshore account, potentially avoiding conversion costs. If resident Indian customers cannot maintain sufficient balances while complying with Indian foreign-exchange rules, banks may decline to issue or renew those cards. That is the bind.

NRIs must also keep separate the rules governing Non-Resident Ordinary accounts. An NRO account typically holds Indian-sourced income: rent, dividends, pensions and certain property-sale proceeds. The Reserve Bank of India allows NRIs to remit up to $1 million per Indian financial year from NRO balances and eligible asset-sale proceeds, subject to applicable taxes and banking requirements. That facility is entirely separate from the $250,000 LRS facility for resident individuals, and the NRO repatriation rules carry no requirement that transferred amounts be spent or invested overseas within 180 days.

Timing becomes critical for NRIs who return to India and resume residency. The FEMA determination considers the purpose of entering or leaving India and the person’s intention to stay, not simply a day count. Once someone becomes resident, applicable Indian bank accounts must be redesignated. NRE and NRO accounts cannot continue unchanged. Assets legally accumulated while the person was non-resident can generally remain abroad. But if the returning NRI later sends fresh money from India to purchase overseas shares or property, resident rules apply, and unused foreign exchange may then face the 180-day deadline.

A separate concern has surfaced around minor account holders. Resident minors have been permitted to remit under the LRS since 2004, with a parent or guardian completing required documentation. The difficulty is that minors have fewer ways to deploy the money: some investments require risk assessments, contracts or consent that a child cannot independently provide. Overseas banks are increasingly questioning whether to continue some minor accounts. For UAE-based NRIs, a child living with non-resident parents in the Emirates does not fall under the scheme solely because the child holds an Indian passport.

How banks in Zurich, Singapore and London ultimately calibrate their appetite for these accounts, and whether Indian regulators offer any clarification on what counts as deployment, will shape the practical options available to resident Indians with offshore relationships in the months ahead.