FCNR Account In Banking: Meaning, Benefits And Eligibility
FCNR, full form Foreign Currency Non-Resident Bank (B), allows NRIs (Non-resident Indians) to invest foreign currency in term deposits in India and earn interest over them. Any NRI who wishes to open a fixed deposit account in India and save their money earned in foreign currency can opt for an FCNR account.
What is an FCNR Account?
FCNR account is a type of foreign currency term deposit account for Non-resident Indians or PIO cardholders. The full form of FCNR is Foreign Currency Non-Resident Account. These are not savings accounts, but foreign currency fixed deposit accounts. NRIs can keep this account in foreign currency, eliminating currency conversion fluctuations risk. They can also earn a fixed rate of interest on the deposit. It is a great way for NRIs to save their foreign earnings as term deposits and invest money in India without exposing themselves to exchange risk.
What is an FCNR(B) Account?
To know the implementation of FCNR (B) accounts, let’s first talk about FCNR (A) accounts. FCNR (A) was introduced in 1975 to help NRIs open a term deposit account in India. At that time, the Reserve Bank of India (RBI) guaranteed the exchange rate that was prevalent during that time. However, in 1993, RBI introduced FCNR (B), rejecting the exchange rate guarantee.
The current FCNR account available to NRIs is FCNR (B) account.
Also Read: NRI Income Tax Slabs: Details On Taxable Income and Deductions
In Which Currencies Do Banks Accept FCNR Deposits?
The permissible currencies include banks accept for FCNR deposits are as follows:
- US Dollar
- Japanese Yen
- Euro
- Canadian Dollar
- Australian Dollar
- British Pound
Features of FCNR(B) Account
Following pointers are some of the salient features of an FCNR account::
- FCNR (B) account allows its holder to deposit their money in the currency of their resident country.
- It is a term deposit account with a minimum tenure of 1 year and maximum tenure of 5 years.
- The principal amount and the interest earned are non-taxable and freely repatriable in India.
- FCNR(B) account holders can avail of loans in foreign currency against their deposits, except that it cannot be used for agricultural, real estate purposes or re-lending.
- FCNR accounts can have 1 or more joint account holders, except that the joint account is not with a resident of India.
- It provides a nomination facility, any NRI/POI/Indian resident can be made a nominee.
Eligibility Criteria for FCNR Account
If an individual needs to open an FCNR (B) account, the following criteria must be met:
- The individual must be a non-Indian resident (NRI), a Person of Indian Origin (POI) or an overseas citizen of India (OCI).
- To open a joint account, it should not include Indian citizens.
- They must have an Indian passport issued by the Indian government at any point.
- They must be Indian citizens as per the Citizenship act, 1955.
Documents Required to Open FCNR Account
You can open an FCNR deposit from anywhere in the world. The following documents are required to open an FCNR account:
- The completed application form must be submitted.
- Passport photocopy.
- Visa photocopy.
- Original copy of the latest overseas bank statement, original copy of the latest overseas telephone or electricity bill.
- Other documents may be required, such as a cancelled check, an overseas bank statement, and proof of income.
- Document requirements may also differ by country.
Difference Between NRE, NRO, and FCNR(B) Accounts
An NRI or PIO can open an account with any authorised bank in India. There are three types of accounts available for NRI residents: NRE accounts, NRO accounts, and FCNR accounts. Discussed below are differences:
| Parameters | NRE | NRO | FCNR |
| Full Form | Known as Non-Resident External Account | Known as Non-Resident Ordinary Account | Known as Foreign Currency Non-resident (Banks) Account |
| Purpose | Lets you deposit income earned outside India in India | Lets you deposit income earned in India | Lets you deposit earnings in foreign currency in Indian account |
| Currency | Foreign currency | Indian rupee | USD, GBP, AUD, SGD, CAD, CHF, HKD, EUR, JPY |
| Taxation | Non-taxable | 30% tax applicable | Non-taxable |
| Withdrawal Currency | Indian Rupee | Indian Rupee | Foreign Currency |
| Exchange Rate Risk | Subject to foreign exchange rate risk | No risk involved | No risk involved |
| Loan Against Deposit | Loan available in Indian rupee | Loan available in Indian rupee | Loan available in foreign currency with certain restrictions |
| Joint Account Opening With Indian Resident | NA | Allowed | NA |
Also Read: PAN Card For NRIs: How To Apply And Track Status Of NRI PAN Card?
Final Word
NRIs have a variety of bank account options to choose from, depending on their requirements. An FCNR account is a good option if you want to avoid currency risks while earning a decent tax-free return while living abroad. Opening an FCNR account is a great option because you will avoid losing money or being penalized due to foreign currency exchange risk and conversion loss, allowing them to benefit from high and guaranteed returns on their deposits.
It is also critical to understand that you should always invest your hard-earned money carefully in a reputable bank, particularly when it is a fixed deposit that you cannot withdraw whenever you want.
FAQs on FCNR Account
Ans: Yes, the FCNR deposit can be withdrawn before the end of the term, but there is a 1% interest penalty.
Ans: A foreign currency non-resident (FCNR) account can be opened in India by a non-resident Indian (NRI), a person of Indian origin (PIO), or an overseas citizen of India (OCI).
Ans: FCNR deposits could help NRIs who have plans to return to India in the future. Earnings in foreign currency and earning interest on them is the added advantage.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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