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What is an FCNR Deposit?

FCNR refers to Foreign Currency Non-Resident Account. Thus, FCNR account is a fixed deposit account that provides Non-Resident Indians with an option to park their foreign earnings in different banks of India. Also, this account allows them to transfer money in foreign currency earned overseas. Moreover, the amount is deposited for a fixed period of time where they earn a fixed interest rate. However, only a few foreign currencies are accepted as deposits in FCNR accounts.

An FCNR account is a good option for NRIs for attracting foreign remittances. Also, the interest rate offered by these accounts depends on the type of currency held and the bank. Furthermore, as the NRI can maintain this account in foreign currency, the risk of fluctuations in currency conversion is eliminated. Therefore, the investor can earn a fixed interest rate on FCNR B deposits which is usually more than the country in which they are residing. 

Besides, an NRI can open an FCNR account individually or jointly with another NRI or a close family Indian resident. Moreover, the tenure of FCNR (B) accounts ranges from 1 year to 5 years. Also, the deposit and interest amount in this account are fully repatriable. Furthermore, there is no tax on the interest earned on the deposits made in this account. Hence, this account is entirely tax-free. 

Features of an FCNR Fixed Deposit

The following are the features of the FCNR fixed deposit account – 

  • Either an NRI (Non-Resident Indian) or PIO (Person of Indian Origin) can open an FCNR account.
  • As the name suggests, an FCNR account can be opened only with foreign currencies, thus eliminating the risk of currency fluctuating conversion rates, 
  • The interest rate paid on this account is like any other fixed deposit account. Also, it is controlled by RBI, where the FCNR rates are similar across all the banks.
  • FCNR account is a fixed deposit (term deposit) account and not a savings account. Therefore, the term should have a minimum maturity of 1 year, and the maximum maturity is 5 years. 
  • The FCNR account also has a nomination facility available. Thus, the nominee can be an NRI or PIO, or an Indian Resident.
  • A loan facility is also available for FCNR fixed deposit accounts where the NRI or PIO can apply for it. However, these loans cannot be used for real estate, agricultural activities or re-lending. 
  • One can convert the currency available in the account to another currency. However, the account holder has to bear the cost incurred due to the difference in the value of currencies.
  • The interest earned on this account is entirely tax-free as well as the principal amount. However, these accounts are taxable under wealth tax. Furthermore, both principal and interest earned are freely repatriable in the country of residence. 

Who can open a FCNR Fixed Deposit?

As the name suggests, the following are the persons who can open an FCNR fixed deposit account – 

  • NRIs – Non-Resident Indians
  • PIOs – Persons of Indian Origin, also known as Overseas Indians

PIOs are people who are Indians by birth or descendants of Indian origin. However, certain exceptions apply to those who are residing in Pakistan and Bangladesh. 

What are the Tax Implications of FCNR Fixed Deposits?

The interest earned and the principal amount in FCNR fixed deposit is tax-free in India. However, the individual is taxed in the country where they reside for the interest earned in an FCNR account. Furthermore, interest on this account is tax exempted as long as the individual qualifies as an NRI or PIO Person of Indian Origin. 

List of Foreign Currencies are Permitted for FCNR Deposits?

The following are the foreign currencies that are permitted for FCNR deposits – 

  • US Dollars
  • Pounds Sterling
  • Euro
  • Japanese Yen
  • Australian Dollars
  • Canadian Dollars

What is the maximum tenure for FCNR Fixed Deposit?

As per RBI regulations, banks can accept FCNR deposits for a maximum tenure of 5 years. However, as per regular domestic term deposits, FCNR deposits must be kept for a minimum of 1 year. Therefore, the tenure for FCNR term deposits ranges from 1 year to 5 years. 

What is the Procedure for a Premature withdrawal from FCNR Accounts?

RBI has extended the facility for premature withdrawal from FCNR accounts. In other words, a withdrawal is allowed from this account before maturity at the discretion of the bank.  However, there is a specific penalty charged by the banks which is usually 1%. Moreover, the charges and withdrawal terms and conditions vary for different banks. Furthermore, the interest rate is not paid by the bank to the account holder in some cases. There are also swapping charges that are fixed by the bank in which the FCNR account is held. 

For instance, the FCNR fixed deposit offered by the HDFC bank will not pay interest on this account to the account holder if the deposit is withdrawn before one year. 

In case the FCNR account is closed before maturity for renewal purpose and avail the benefit of an increase in interest rate. Also, if the scheme is renewed under the same scheme and same currency, no penalty charges are applied. 

Additionally, withdrawal is not permitted if the depositor has availed a loan against this account. Therefore, one has to understand the terms and conditions of the premature withdrawal of these deposits before investing in them. 

FCNR Interest Rates For Top Banks

SBI (State Bank of India) Bank FCNR Interest Rate

TenureUSDGBPEUROCADAUDJPY
1 year0.730.630.010.620.130.02
Above 1 year to less than 2 years0.730.630.010.620.130.02
2 years to less than 3 years0.80.790.010.630.190.05
3 years to less than 4 years1.020.930.010.930.360.05
4 years to less than 5 years1.281.070.11.210.660.05
5 years1.531.190.151.430.920.05
*Interest rates effective from 10th April 2021

HDFC Bank FCNR Interest Rate

TenureGBPUSDEuroAUDJPYCAD
1Yr to < 4 Yrs0.01%0.01%0.01%0.01%0.01%0.01%
4 Yrs to < 5 Yrs0.01%0.01%0.01%0.01%0.01%0.05%
5 Yrs only0.01%0.20%0.01%0.20%0.01%0.50%
*Interest rates effective from 1st April 2021

ICICI Bank FCNR Interest Rate

TenureUSDGBPJPYCADAUDSGDHKD
>= 12 months < 24 months0.230.010.010.220.010.250.1
>= 24 months < 36 months0.30.140.010.230.040.370.18
>= 36 months < 48 months0.52
>= 48 months < 60 months0.78
60 months1.03
*Interest rates effective from 1st April 2021

Axis Bank FCNR Interest Rate

TenureUSD
Below 50 lakh
USD
Above 50 lakh
GBPEUROAUDCADJPY
Above 1 year but less than 2 years0.50%0.50%0.30%0.01%0.40%0.55%0.01%
2 years and above but less than 3 years0.30%0.30%0.30%0.01%0.40%0.55%0.01%
3 years and above but less than 4 years0.45%0.45%0.30%0.01%0.40%0.55%0.01%
4 years and above but less than 5 years0.55%0.55%0.30%0.01%0.40%0.55%0.01%

FCNR or NRE FD – Which is better?

Both FCNR and NRE FD accounts are for the benefits of NRIs. Moreover, the purpose of the NRE account is to deposit income earned outside India in India. Simultaneously, the FCNR account is for depositing earnings in foreign currency in an Indian account. The NRE FD is used when the person visits India and uses it to manage expenses in India. Also, an NRE account is subject to currency fluctuations due to foreign exchange risk. Conversely, FCNR is used for investment-related purposes outside India. Also, there is no currency risk in this account. Therefore, based on the requirement of the individual, one can choose either FCNR or NRE account. 

How can you open an FCNR account?

One can open this account by sending remittance from overseas, by either internet banking or mobile banking services if you already have an NRE account or NRO account. Also, you can send or submit a request to the bank directly. 

How does one deposit money into the FCNR deposit?

The following are the ways that one can deposit money in the FCNR fixed deposit – 
One can either directly transfer from the overseas bank account through a wire transfer or personal cheque, or individuals can transfer from any NRE/ NRO account or transfer from an existing FCNR account. Furthermore, one can also use traveller’s cheque or foreign currency notes when they are visiting India. However, a currency declaration form is required if the amount exceeds USD 5,000 or equivalent. 

Frequently Asked Questions

Can I prematurely withdraw money from the FCNR FD?

Yes, you can withdraw money from FCNR FD before maturity. However, certain penalty charges will apply for withdrawals before maturity, which may vary from bank to bank. Also, the bank’s swapping charges are fixed in which this account is held. 

Can interest rates change during the tenure of the deposit?

The FCNR deposit rates vary with the bank and tenure of the deposit. This account allows NRI to earn a fixed interest rate until maturity. Therefore, the rate of interest is fixed and does not change during the tenure of the deposit. 

Does the FCNR B account have a nomination facility?

The FCNR B account is a fixed deposit account and not a savings account. Therefore, this account has a nomination facility. The nominee can be anyone, i.e. NRI, PIO or Indian Resident. 

Is FCNR interest taxable in India?

The interest earned on the FCNR account is not taxable in India. However, it is taxable in the country in which the depositor is residing. Furthermore, both principal and interest are freely repatriable. 

Is FCNR deposit good?

The benefits of FCNR fixed deposits is that the deposit is maintained only in foreign currency. Thus, it is protected from foreign exchange risk. Furthermore, through this account, one can quickly repatriate the principal and the interest earned to the country of residence. 

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