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A Non-Resident Indian (NRI) or Person of Indian Origin (PIO) can invest and maintain a term deposit in foreign currency in an account called FCNR (Foreign Currency Non-Resident Account). They can also earn interest from this term deposit. Only a few foreign currencies are accepted as deposit in FCNR Fixed Deposit accounts. The list of currencies that are accepted are:
These accounts are not savings accounts rather they are fixed deposits accounts.
As per the SBI (State Bank of India) website the updated FCNR rates of interests on investing deposit in different currencies are:
| PERIOD | GBP | USD | JPY | AUD | CAD | EURO |
|---|---|---|---|---|---|---|
| 5 Years | 1.90% | 3.29% | 0.05% | 2.82% | 2.45% | 0.15% |
| 4-5 Years | 1.82% | 3.25% | 0.05% | 2.70% | 2.39% | 0.10% |
| 3-4 Years | 1.71% | 3.16% | 0.05% | 2.34% | 2.31% | 0.01% |
| 2-3 Years | 1.56% | 3.04% | 0.05% | 2.14% | 2.18% | 0.01% |
| 1-2 Years | 1.34% | 3.09% | 0.02% | 1.97% | 2.04% | 0.01% |
| 1 Year | 1.34% | 3.09% | 0.02% | 1.94% | 2.04% | 0.01% |
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In an FCNR account held by an NRI or PIO, money can only be deposited by overseas held funds. The different ways in which they can fund the account is:
Read more about: Pros and Cons of FCNR deposit
Funds can be transferred from a third party account only if the person who sends money to the FCNR account and the person who receives the money from the account are the same.
In this case, most banks will automatically renew the fixed deposit account and the account holder will keep earning the interest on it although there is an option to stop the automatic renewal. The account holder can open the account with the bank under non-renewal mode and give additional instructions as to what the bank should do on maturity of the term deposit.
Yes, an NRI or PIO cannot open an FCNR account as a joint account with another person who Is a resident of India.
Since any funds in an FCNR account are to be maintained in the respective foreign currency and conversions into Indian rupee is not allowed, FCNR account holders are not affected by fluctuation in the Indian currency.
No, interest earned on an FCNR account is not taxable.
Yes, loans related to an FCNR account can be paid through local resources.
For an NRI returning to India, he or she can wait till the time the FCNR account matures and then convert it into an RFC account.
No, there is no exchange loss when a returning NRI transfers funds from an FCNR account to an RFC account.
Yes, a withdrawal is allowed from the FCNR account before the term has matured at the discretion of the bank but there is a penalty charge levied for the withdrawal. For premature withdrawals concerning FCNR accounts, no interest is to be paid by the bank to the account holder and further money may be charged by the bank to cover swap costs.
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Banks who were offered a swap facility from the RBI to attract foreign currency non-resident (FCNR-B) scheme in September 2013 will not get a similar facility if they decide to rollover the deposits when these mature later this year.
RBI governor Raghuram Rajan the country had attracted around $32 billion of deposits with two maturities over a period of about two months. There could be an impact on either liquidity or the forex markets. However RBI is prepared for such a change.
12 April 2016
