Fixed deposits, particularly in NRE accounts, continue to attract NRI capital due to their tax-free status. However, post-inflation, the real return hovers barely around 1-2 percent per year.
Across thousands of NRI families, Indian bank accounts, fixed deposits and informal family-managed investments quietly hold decades of accumulated wealth. But while these choices once served the purpose of convenience and capital preservation, today, they may be eroding purchasing power and limiting true financial potential.
In an economy where inflation moves faster than traditional returns, and where asset markets have evolved in both depth and accessibility, continuing with legacy strategies may cost far more than most realise.
Comfort comes at a price
India’s financial ecosystem has matured significantly – broader capital markets, stronger regulations, and a more investor-friendly environment. Yet, many NRIs continue to treat their Indian assets passively, relying on outdated assumptions of “safety first.”
What feels risk-averse is often quietly destructive: a minor annual underperformance compounds dramatically over decades. In real terms, it means less ability to support family, less flexibility to repatriate wealth, and fewer options for future life stages.
Preservation alone is no longer enough. Capital must be structured to serve evolving goals: protection, income, liquidity — but also sustainable growth.
The false security of savings accounts
A non-depleting balance offers psychological reassurance. But in a high-inflation environment, nominal stability hides real deterioration.
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With average savings interest rates of 3-4 percent and inflation of around 5 percent or higher, money left idle in savings accounts consistently loses purchasing power. ₹50 lakh parked today will steadily buy less every passing year, even if the number itself grows marginally.
The safety many NRIs assume is, in fact, a slow but certain decline in real wealth.
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Fixed deposits: An expensive illusion of stability
Fixed deposits, particularly in NRE accounts, continue to attract NRI capital due to their tax-free status. However, post-inflation, the real return hovers barely around 1-2 percent per year.
NRO fixed deposits fare even worse. After factoring in 30 percent TDS and additional surcharge and cess, effective returns fall sharply. Over longer holding periods, this tax friction translates into substantial lost capital – capital that could otherwise be compounding at rates meaningfully above inflation.
The traditional thinking that tax-free status equals optimal deployment no longer holds when measured against opportunity cost.
The structural risks of informal family management
Entrusting investments to family members inside India, is another common fallback. It’s convenient. It avoids paperwork. It feels safe.
Yet legally, assets held under a relative’s name are theirs, not yours. In the event of disputes, estate transitions, or medical emergencies, informal agreements offer no real protection.
Tax liabilities can also get blurred. Income flows into the resident’s tax filings, creating complications under Indian and foreign reporting requirements. Moreover, non-professional management usually results in suboptimal asset selection, emotional decision-making, and poor portfolio discipline.
What starts as a convenience often becomes a liability,sometimes when it’s least expected.
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A smarter path: Structured, compliant wealth management
Today’s NRI investors have access to compliant structures that combine growth, liquidity, and security under professional oversight.
Using the appropriate NRE and NRO accounts to hold properly managed portfolios allows full regulatory alignment while unlocking India’s real growth potential — equities, hybrid products, and structured fixed-income opportunities tailored for capital protection with higher yields.
Why structure matters
Ownership clarity: Assets remain in your legal name.
Cross-border compliance: Full adherence to FEMA and RBI regulations, avoiding future disputes or penalties.
Active management: Portfolios designed to beat inflation, not just preserve principal.
With the right structure, NRIs can avoid the operational risks of informal management and access strategies designed for long-term capital compounding.
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Growth vs. stagnation: The numbers
For a Rs 50 lakh investment held over a 10-year period:
Savings account (3-4 percent): Real decline after inflation.
NRE Fixed Deposit (7 percent): Approx. Rs 98 lakh (pre-inflation).
NRO Fixed Deposit (after tax): Approx. Rs 80 lakh.
Professionally managed portfolio (9 percent net of tax and fees): Approx. Rs 119 lakh.
That Rs 21 lakh–39 lakh delta is the difference between maintaining capital and actually expanding financial capacity — the ability to support generational needs, strategic investments, or an independent retirement lifestyle.
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Rethinking wealth is rethinking purpose
Wealth should not be idle. Especially not in a country projected to be among the world’s fastest-growing major economies for the next two decades.
Restructuring NRI capital is not simply about chasing returns. It’s about restoring alignment between money and purpose: ensuring assets are protected, growing meaningfully, and available when truly needed.
Every rupee left passive today risks eroding tomorrow’s choices.
For NRIs serious about preserving and expanding their global financial strength, the time to rethink India-based wealth is now.
The author is Co-founder & Executive Director, Prime Wealth Finserv Pvt Ltd.
Disclaimer: The views expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.