Converting an NRE account to a resident account: what it involves
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Once someone returns to India with the intention of resettling permanently, their existing NRE account is generally expected to be converted, since NRE accounts are specifically designed for non resident status and are not meant to continue operating unchanged once that status ends. The conversion typically involves notifying the bank of the change in residency status and completing updated documentation confirming the new resident classification.
Depending on individual circumstances, the funds in a former NRE account are generally either transferred into an ordinary resident savings account or, in some cases, moved into a resident foreign currency account, which can allow certain foreign currency holdings to be retained for a defined period after return. Interest earned going forward is also treated differently once an account is reclassified, reflecting the change in tax residency status.
Because timing, available account options and applicable transitional rules can vary and are tied closely to individual tax residency status, this conversion process is generally best approached with direct guidance from the bank and a tax adviser rather than assumptions carried over from NRI status. Addressing it promptly after return, rather than leaving accounts unchanged indefinitely, is generally the more prudent approach.