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    Pros and Cons of FCNR deposit

    Non Resident Indian (NRIs) who would like to open an account in India have several options to choose from such as NRE Fixed Deposit Account, Non-Resident Ordinary (NRO) Savings Account and Foreign Currency Non Resident (FCNR) Fixed Deposit Account among others.

    There are several factors which NRIs should consider before choosing to open an account in India such as the following:

    Factors galore

    • Family factor:

      Can a relative or family member of the NRI in India operate the account with a mandate card provided by the bank?

    • Source factor:

      Should the funds in the account be deposited from sources in abroad only or from India as well?

    • Currency factor:

      What are the currencies in which the account can be opened and the associated risk of currency rates?

    • Tax factor:

      Will the principal and the interest in the account come under the purview of tax laws in the country.

    • Repatriability factor:

      Can the funds be converted back to the foreign currency?

      According to experts, FCNR play a significant role in terms of attracting remittances from NRIs. It is, in some ways, a unique financial instrument in that unlike NRE and NRO accounts, FCNR accounts can be opened as term deposit accounts only. FCNR accounts can be opened from overseas by submitting copies of passport and visa of the account proposer in addition to bank accounts held overseas, proof of foreign residence and income documents among others.

      Interest rates offered for FCNR accounts may vary depending upon the type of currency and the bank. For instance, FCNR deposit (one year) in USD may be around 2.5 to 3% but could be pegged at 5% for the Australian dollar.

    Foreign Currency Non Resident (FCNR) Fixed Deposit Account

    Some of the advantages of the Foreign Currency Non Resident (FCNR) Fixed Deposit Account are as follows:

    • FCNR accounts are protected against forex rate risks (changes in the value of rupee vis-a-vis the currency in which the account is denominated) as they are maintained in a foreign currency. In other words, the principal and the interest are transferred in the currency in which the account is maintained sans any loss of exchange.
    • Interest earned on FCNR deposits in India is exempt from Income tax.
    • FCNR accounts can have two or more NRIs joint account holders. However, joint account with another person resident in India is not permitted.
    • FCNR accounts are denominated in several major currencies such as Pound Sterling, US Dollar, Yen and Euro.
    • In FCNR accounts, both principal and interest are freely repatriable. In other words, the interest earned and the deposit amount on the deposits are repatriable to the depositor's country of residence sans restrictions.
    • FCNR accounts are offered for not less than 1 year and not more than 3 years.
    • All authorized banks which offer FCNR accounts set the interest rates within the ceiling as announced by the Reserve Bank of India. Interest rates on FCNR term deposit accounts should, therefore, be set by the board of directors of a particular bank, under the broad mandate of RBI regulations.
    • Interest rates on FCNR term deposits are payable after the end of first year. Interest is compounded on a half-yearly basis subsequently.
    • Rupee loans against funds held in the FCNR accounts can be provided to account holder for any investment in India. Foreign currency loans outside India permitted to the account holder, can be repaid from the maturity proceeds. Some banks may also provide loans to firms or companies against the collateral of FCNR accounts.

    FCNR and Current Account Deficit

    RBI, in a bid to attract more foreign exchange into the country, may announce a 'bonanza', as it were, for NRIs by offering high interest rates on FCNR deposits. According to experts, increased inward remittances from NRIs, lead to more forex reserves, which in turn, reduce the current account deficit (CAD) of the country. The current account deficit is one of the main reasons of depreciation of the rupee. According to experts, any tapering of quantitative easing (QE) by the US Federal Reserve Bank, raises fears of less capital investment in India by foreign institutional investors (FIIs).

    Attracting NRI deposits through FCNR deposits

    While raising interest rates under the FCNR deposit scheme may prove beneficial for NRIs, RBI have certain protective measures for banks in India such as facility of swapping the US dollar funds at a fixed rate (usually 3.50%). The swap facility and the high interest rates offered on FCNR deposits can cease with prior notice since they reportedly expose the RBI to incur losses running to thousands of crores. The RBI, therefore, may discontinue the said facility and reduce interest rates if it attracts the desired forex reserves into the country.

    Some of the disadvantages of the Foreign Currency Non Resident (FCNR) Fixed Deposit Account are as follows:

    • If FCNR deposits are held with a weak bank, it may be unable to pay back upon maturity. Credit guarantee in India covers accounts in India to around Rs. 100,000 or 1600 USD, which is considered low. Many experts, therefore, believe that deposit insurance is almost non-existent in India, which could be a concern for FCNR deposit account holders.
    • In the event of a financial meltdown, banks may not be able to repatriate funds. The Greek crisis is a case in point. In some cases, Greek citizens, were reportedly, restricted from withdrawing over 40 euros from their accounts.
    • If FCNR deposit is withdrawn in less than one year, no interest is payable.
    • Foreign currency loans in India against FCNR accounts can be taken by account holders only.
    • FCNR deposits are offered for term deposits only and not for current, savings and recurring accounts.
    • FCNR account can be transferred to other NRE accounts before maturity. However, penalties will apply for premature withdrawals. Also, swapping charges are fixed by the bank in which the FNCR account is held.
    • FCNR accounts can be renewed within 14 days after maturity, failing which, the bank will fix interest rate on renewal. If renewed accounts are withdrawn before a fixed period, banks can take back the interest paid.
    • While the interest earned on FCNR deposits is tax-free, it may be taxable in the country of residence of NRIs. Also, Non Resident Indians, should consult tax experts to understand the implications of investing in India.
    • While RBI, under the Foreign Exchange Management Act, formulates rules of investment for NRIs in India, the Government of India, under the Indian Income Tax Act frames the tax rules, which are subject to change.

    Pros and Cons of FCNR deposit Reviews

    • Citibank Fixed Deposit
      "Its Good"
      0.5 3.0/5 "Satisfactory"
      I have converted saving maintenance into FD account for the term of one year. I can prolong period based on my convenience, the rate of interest is average for the fixed deposit. However I have online option to open and close the fixed deposit account at any time.
      Was this review helpful? 0
      , bangalore
      Reviewed on Mar 11, 2019
    • ICICI Bank Fixed Deposit
      "Satisfactory"
      0.5 5.0/5 "Blown Away!"
      My fixed deposit is with ICICI Bank. I can open and close this account online. The interest I earn is satisfactory. The customer services and response is good and in all it is a smooth process and there are no unwanted charges taken for the same.
      Was this review helpful? 2
      , chennai
      Reviewed on Mar 10, 2019
    • ICICI Bank Fixed Deposit
      "Attractive interest with best saving"
      0.5 5.0/5 "Blown Away!"
      As per the current financial year they are providing 7.2% of interest on the fixed deposit, I can deposit minimum of Rs. 5000 to upto 5 crores. I have activated ICICI Fixed deposit through online, the account got activated on the same day. There is no charges for prematurity .
      Was this review helpful? 2
      , thane
      Reviewed on Mar 08, 2019
    • HDFC Bank Fixed Deposit
      "Very Good Service"
      0.5 4.0/5 "Great!"
      I had just started this investment couple of months back and the services which they had provided has been good. I had started this investment through one of the brokerage nearby. Their customer support has been helpful and has been guiding me through out and the interest rate which they are offering has also been quite good.
      Was this review helpful? 4
      , new delhi
      Reviewed on Mar 03, 2019
    • andhra Bank Fixed Deposit
      "Its Good"
      0.5 5.0/5 "Blown Away!"
      Last year I had fixed deposit with Andhra Bank this January it got matured, the interest was good. The bank staffs are very cooperative on my queries it located in home town. I invested the amount of Rs.50,000 then I got the total amount of Rs. 55,000.
      Was this review helpful? 3
      , hyderabad
      Reviewed on Mar 02, 2019
    • Union Bank of India Fixed Deposit
      "Good Savings"
      0.5 4.0/5 "Great!"
      I done one time investment of fixed deposit with Union Bank of India. As per the current financial year the FD interest gone down around 6.75% for per annum. I opened the account through bank, they taken 3 to 4 for activation. The customer support is good I don' t have any issues.
      Was this review helpful? 3
      , mumbai
      Reviewed on Feb 26, 2019
    • SBI Fixed Deposit
      "Trusted Saving with SBI"
      0.5 3.0/5 "Satisfactory"
      All we know, SBI is a government bank, that is the reason I have availed fixed deposit from them. As per the current financial year they are providing the interest around 6%, I opened the account through online, but for the closure I think I need to visit the bank.
      Was this review helpful? 4
      , pune
      Reviewed on Feb 25, 2019
    • Oriental Bank of Commerce Fixed Deposit
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      I have opened my fixed deposit in Oriental Bank of Commerce and am depositing every year in the month of June. The interest rate is reasonable, they are offering 6.65% even other banks are giving the same interest. I don't have customer service experience. Mostly am using their online service for transactions.
      Was this review helpful? 3
      , hyderabad
      Reviewed on Feb 21, 2019
    • SBI Fixed Deposit
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have taken my fixed deposit with STATE BANK OF INDIA, their service is good they provide me good interest rate,my deposit is good in growth, and I am making payment through on line like it get auto debited, and till now experience with this bank was good.
      Was this review helpful? 10
      , hyderabad
      Reviewed on Feb 20, 2019
    • Kotak Fixed Deposit
      "Best investment Plan"
      0.5 5.0/5 "Blown Away!"
      I have taken fixed deposit account in kotak mahindra Bank . They are not charging any charges for the account . I used to get income tax benefits . Am satisfied with the customer service and response.They are giving good rate of interest . Overall am happy with my account .
      Was this review helpful? 3
      , bangalore
      Reviewed on Feb 20, 2019
    • Axis Bank Fixed Deposit
      "Services are good"
      0.5 5.0/5 "Blown Away!"
      I also bank with Axis Bank for the fixed deposit. The customer support and response is good. There are no hassles in the process. I could open this account online. The lock in period is for one year. The rate of interest they provide on my savings is also satisfactory.
      Was this review helpful? 8
      , pune
      Reviewed on Feb 15, 2019
    • SBI Fixed Deposit
      "Good service"
      0.5 4.0/5 "Great!"
      I have fixed deposit with SBI,As per the bank norms rate of interest is up to 6.88%. I opened the account through bank, There is no maturity period, like it is no fixed period, i can keep on deposit whenever i want and i take whenever i need it is unlimited, Their service is good.
      Was this review helpful? 6
      , bangalore
      Reviewed on Feb 14, 2019
    • SBI Fixed Deposit
      "Good saving for future"
      0.5 4.0/5 "Great!"
      SBI FD account is good, 2 months back I opened this account through offline, I have invested some amount its good, the interest rate is around 8% per annum. The customer support is very good . I can access account through online banking its fine.
      Was this review helpful? 3
      , bangalore
      Reviewed on Feb 09, 2019
    • ICICI Bank Fixed Deposit
      "Need to increase the interest rate"
      0.5 5.0/5 "Blown Away!"
      I do have a fixed deposit account with ICICI and it was taken recently. I have chosen ICICI because my salary and saving account was maintained with them. I am getting good response from the customer service. They are giving average interest rate. I do monthly deposit of less than 50K.
      Was this review helpful? 3
      , mumbai
      Reviewed on Feb 09, 2019
    • Kotak Fixed Deposit
      "Good features"
      0.5 5.0/5 "Blown Away!"
      Kotak Mahindra Bank is good in their customer services. I bank with them for the fixed deposit. I could open this account online. The lock in period is for one and half year. The rate of interest is really good. I could also close the account online.
      Was this review helpful? 3
      , hyderabad
      Reviewed on Feb 07, 2019
    • SBI Fixed Deposit
      "Safe and secured investment"
      0.5 5.0/5 "Blown Away!"
      Currently FD interest rate is around 6.5% for per annum. I deposited one time amount of Rs. 2 lakhs for one year, I have activated the service through online, I have netbanking option to track the details, before expiry if we withdraw the amount but there will be interest various applicable.
      Was this review helpful? 4
      , bangalore
      Reviewed on Feb 07, 2019
    • HDFC Bank Fixed Deposit
      "Good"
      0.5 4.5/5 "Excellent!"
      I have a fixed deposit with HDFC which was started 2 years back. I have chosen it mainly for the interest rate and also its convenient to open this account online also am a salary account holder. The locking period is 5 years. I never faced issues with the customer service. They need an improvement on interest rate because I think it could be better.
      Was this review helpful? 3
      , bangalore
      Reviewed on Feb 01, 2019
    • SBI Fixed Deposit
      "Good for savings"
      0.5 4.0/5 "Great!"
      I have fixed deposit with SBI, I deposited one time amount of Rs. 2 lakhs. As per the bank norms rate of interest is 11.50%, I opened the account through bank, on time they activated the fixed deposit. There is no proper coordination with the staff end.
      Was this review helpful? 14
      , hyderabad
      Reviewed on Feb 01, 2019
    • review Fixed Deposit
      "Need scope of improvement on the online tech"
      0.5 4.0/5 "Great!"
      I have FD account with Janakalyan Sahakari bank, the interest rate is quite good. We can invested the minimum amount from Rs. 20,000 to max amount. I have term of one year, I opened the FD through branch, but for the activation they taken 48 hours. To track the FD details I need to visit to the bank.
      Was this review helpful? 4
      , mumbai
      Reviewed on Jan 28, 2019
    • YES Bank Fixed Deposit
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have the fixed deposit account with the Yes bank and the interest rate they have given me is good, and i had started this investment a long time back. The interest rate with them has also been good. They have given me up to 8% approx it high compare to other bank, that is best part, and On line banking services are fine one too and am really happy with them, but maturity period was not expired.
      Was this review helpful? 7
      , mumbai
      Reviewed on Jan 26, 2019
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