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    FCNR Fixed Deposit

    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:

    • Euro
    • BP (British Pound)
    • USD (US Dollar)
    • AUD (Australian Dollar)
    • JPY (Japanese Yen)
    • CAD (Canadian Dollar)

    These accounts are not savings accounts rather they are fixed deposits accounts.

    FCNR term deposits rates

    As per the SBI (State Bank of India) website the updated FCNR rates of interests on investing deposit in different currencies are:

    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%

    Some of the advantages of maintaining term deposits in FCNR are:

    • A deposit in an FCNR account is maintained in foreign currency which eliminates the problem of dealing with constant fluctuation of currency conversion rates.
    • The maturity term of these deposits ranges from 1 to 5 years.
    • The interest rates earned on these deposits are regulated by the RBI and are the same in all banks across the country although the rates of interest are generally higher than those provided by the countries wherein the NRI is residing.

    How does an NRI or PIO transfer funds to an FCNR account?

    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:

    • The PIO or NRI can transfer funds from their overseas account to the FCNR account. This can be done via wire transfer, cheque transaction or online banking.
    • Funds can be transferred from an existing NRE account.
    • When an NRI or PIO visits the country, foreign currency notes or travelers cheques can be used to fund the FCNR account.

    Read more about: Pros and Cons of FCNR deposit

    Features of FCNR

    • FCNR (Foreign Currency Non-Resident) account can be only be opened by a PIO or NRI.
    • As the name states, a Foreign Currency Non-Resident account can only be opened with foreign currencies which eliminates the risk of fluctuating conversion rates.
    • An interest is paid on the FCNR account. It is controlled by the RBI and is the same across all banks.
    • The FCNR is not a savings account but is a term deposit. The term should have a minimum maturity of 1 year and a maximum maturity period of 5 years.
    • This account also has a nomination facility. The nominee can be any NRI, PIO or resident Indian.
    • The NRI or PIO can even apply for a loan facility against an FCNR account but these loans can't be used for real-estate, agricultural activities, or re-lending.
    • The currency available in the account can be changed to another currency but the cost incurred due to the difference in the value of the currencies is to be beared by the account holder.
    • The interest earned on these accounts are completely tax free and so is the principal. Although these accounts are subjected to wealth tax.

    Frequently asked questions

    1. Can an FCNR holder transfer funds from a third party account?  
    2. 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.

    3. What is the consequence when an FCNR account holder’s fixed deposit matures and he or she forgets about it?
    4. 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.

    5. Can an NRI or PIO open an FCNR account as a joint account with another person who is a resident of India?
    6. Yes, an NRI or PIO cannot open an FCNR account as a joint account with another person who Is a resident of India.

    7. Is an FCNR account holder liable to protection against fluctuation in the value of the Indian currency?
    8. 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.

    9. Is interest earned on an FCNR account taxable?
    10. No, interest earned on an FCNR account is not taxable.

    11. Can loans related to an FCNR account be paid through local resources?  
    12. Yes, loans related to an FCNR account can be paid through local resources.

    13. What happens to the FCNR account of the NRI when he or she returns to India?
    14. 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.  

    15. Is there an exchange loss when a returning NRI transfers funds from an FCNR account to an RFC account?
    16. No, there is no exchange loss when a returning NRI transfers funds from an FCNR account to an RFC account.

    17. Can funds be withdrawn from the FCNR account before the deposit has matured?
    18. 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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