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.
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.
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.
The permissible currencies include banks accept for FCNR deposits are as follows:
Following pointers are some of the salient features of an FCNR account::
If an individual needs to open an FCNR (B) account, the following criteria must be met:
You can open an FCNR deposit from anywhere in the world. The following documents are required to open an FCNR account:
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:
|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|
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.
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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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
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