FCNR Fixed Deposit Account

Foreign Currency Non-Resident (FCNR) accounts are popular among NRIs due to several benefits. No exchange risk, tax advantages, and full repatriation make them a secure and convenient investment option for overseas earnings.

Indian banks offer FCNR fixed deposit accounts to Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs). The account allows you to deposit and maintain your earnings in foreign currencies, such as US Dollar (USD), British Pound (GBP), and Euro (EUR), among others.

 

In these accounts, the principal and interest are freely repatriable. This means you can transfer them  back to India without any restrictions. However, these accounts are subject to specific regulations and terms. FCNR fixed deposit interest rates can vary based on the global market conditions and the tenure.

These deposits allow for the secure growth of foreign earnings while mitigating exchange rate risks. Funds that you can deposit into an FCNR(B) account include:

• Transfers from your overseas bank account

• Funds moved from existing NRE or FCNR(B) accounts

• Interest earned on the existing FCNR(B) deposit

You can open a fixed deposit in foreign currency and earn interest that is exempt from tax in India. You can also use your FCNR (B) account as collateral for loans. The following are some features of an FCNR account:

Flexibility

Investors can deposit funds in multiple currencies, aligning with RBI's approved list, without converting to Indian Rupees, providing flexibility.

Taxation

FCNR fixed deposit interest earnings are not subject to taxes in India.

Deposit Tenure

As a term deposit of 1 to 5 years, the FCNR account allows NRIs to earn stable interest rates, regardless of residency changes.

Nomination Facility

You can nominate either an NRI or an Indian resident for your FCNR accounts.

Joint Account Holding

An FCNR account can also be opened with two or more joint NRI account holders or a resident on a former or survivor basis.

Loan against FD

FCNR account holders can receive loans from banks by pledging their deposited funds as collateral.

No Exchange Risk

As funds are held in foreign currency, there's no exchange rate risk.

Repay Debts

Any maturity proceeds earned in an FCNR FD account can be used to repay or settle foreign currency loans beyond India.

Foreign Currency Deposit

It offers NRIs a secure way to maximise returns on foreign currency investments. 

Currency of Deposit

You can open FCNR Fixed Deposits in foreign currencies like USD, GBP, EURO, CAD, JPY, or AUD.

Repatriation Benefits

The principal and interest on FCNR Fixed Deposits are fully repatriable. It allows you to transfer the funds seamlessly to your account in your country of residence.

Interest Rates

FCNR fixed deposit interest rates vary depending on the bank and the tenure you choose.

Premature Withdrawal

Banks do not pay interest on FCNR deposits withdrawn before one year. For withdrawals after one year, you will earn interest based on the applicable rate at the time of deposit for the holding period.

Safety and Security

The FCNR-B account is a secure and beneficial option for investing foreign earnings.

Higher Returns Compared to Domestic FDs

These deposits offer better returns compared to domestic fixed deposits.

FCNR accounts are specifically designed for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs). The following individuals are eligible to apply:

1. NRIs

Indian citizens living abroad for purposes such as employment, business, studies, or any other reason that indicates their stay outside India is for an indefinite or extended period.

2. PIOs

Citizens of any country, except Bangladesh and Pakistan, who meet at least one of the following criteria:

• Have held an Indian passport at any time.

• Either of their parents or grandparents was a citizen of India under the Constitution of India or the Citizenship Act of 1955.

You need to provide the following documents to open an FCNR FD account: 

• Valid passport with a recent passport-size colour photograph of yourself

• Work/residence permit or residence/employment Visa to confirm your NRI status

• Proof of address in your resident country

• Copy of your Form 60 or PAN card  

• NRI seafarers have to provide a Continuous Discharge Certificate (CDC) copy with a disembarkment stamp on the last page 

• NRI seafarers may also be asked to provide a Foreign Exchange Management Act (FEMA) declaration  

• PIOs need a valid PIO/OCI card and a signed declaration to prove their PIO status

You can either apply online or through offline methods to open an FCNR account after fulfilling the eligibility criteria. Here are some steps you can consider to open an account: 

1. Choose a financial institution where you want to open your FCNR account

2. Decide on the tenure and currency for your deposit, as interest rates vary by currency across different banks

3. Gather the necessary documents, including your passport, visa, proof of foreign residency, KYC, and a Foreign Account Tax Compliance Act (FATCA) declaration

4. Fill out the application form online or visit the nearest branch 

5. Receive your account details

6. The bank will activate your FCNR account after reviewing your application and documents.

The interest rates applicable on FCNR accounts depend on the bank’s policies, global market conditions, the deposited currency, and the tenure you choose. The following table shows the interest rates for USD with tenure:

Disclaimer: Interest rates are subject to change at any time based on the bank’s policies. 

 

Here is how to calculate the FCNR interest earned:

• If you withdraw funds before one year, you will not receive any interest on your deposits 

• For withdrawals after one year, you will earn interest based on the applicable rate for the investment period

The following are some of the terms and conditions related to FCNR deposit:

Automatic Renewal

Deposits are automatically renewed for the same period at prevailing rates unless stated otherwise.

Premature Encashment

All signatories need to sign for premature encashment. Rules of the Reserve Bank of India apply.

Queries

Always provide the deposit account number for communication and update maturity instructions in advance.

TDS

TDS (Tax Deducted at Source) is applicable when the interest on your fixed deposit exceeds ₹40,000 (₹50,000 for senior citizens). If you have not provided your PAN, the TDS rate will be higher. TDS will be deducted from the interest earned, or from the principal if necessary.

Insurance Cover

Deposits are insured up to ₹5 Lakhs (principal + interest) by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

NRIs can open three types of different accounts to store their funds in, namely NRO, NRE and FCNR accounts. These can be opened with most authorised banks and come with their own set of features. The differences between them are as follows:

You will be able to transfer funds from your NRE account opened in India or any other foreign currency account outside India to your FCNR account. During the process, this amount will be converted into foreign currency present in the FCNR FD account at the current exchange rates and deposited accordingly. 

 

However, it is important to remember that you will not be able to fund your FCNR fixed deposit via a third-party account.