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.
In Which Currencies Do Banks Accept FCNR Deposits ?
The permissible currencies include banks accept for FCNR deposits are as follows:
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.
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:
Known as Non-Resident External Account
Known as Non-Resident Ordinary Account
Known as Foreign Currency Non-resident (Banks) Account
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
USD, GBP, AUD, SGD, CAD, CHF, HKD, EUR, JPY
30% tax applicable
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
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.
Q1. Is it possible to withdraw a premature FCNR deposit?
Ans: Yes, the FCNR deposit can be withdrawn before the end of the term, but there is a 1% interest penalty.
Q2. Who is eligible to open an FCNR account?
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).
Q3. Is an FCNR deposit a good investment?
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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