FCNR Accounts: Boon for NRIs
In the last three months or such, India has witnessed heavy amount of volatility in the rupee value. This has not only resulted in losses to domestic investors (those investing in equities, debt and currency) but even the Non Resident Indians (NRIs) have also become about going forward with their investment plans in their motherland.
Fortunately, NRIs have the Foreign Currency Non Resident Bank (FCNR) account, which can save their investments against currency risks.
About FCNR account
An FCNR account stands for Foreign Currency Non Resident Bank account that is a term deposit account or fixed deposit account exclusively maintained by the NRIs and PIOs in foreign currency. You can easily earn a regular stream of interest income with these accounts. Before 2011, FCNR could only be maintained in US dollar, Pound Sterling (GBP), Euro, Japanese Yen, Australian dollar, and Canadian dollar. However, since October 2011, the RBI has authorized dealer banks in India to accept FCNR deposits in any permitted (freely convertible) currency.
How to open an FCNR account?
An FCNR account can be opened for minimum of one and maximum five years and deposit money for FCNR account should come from your overseas funds. Funds can be transferred to your FCNR account directly from your account existing overseas or from an existing NRE account, as you desire. In case, you are visiting India, you can also get your FCNR account opened using foreign currency notes or travelers cheques.
Interest Rates Offered
Depending on the terms and conditions followed by a bank, interest rates are decided. Also, interest rates are dependent on the currency in use. The interest rate on an FCNR account is tax free in India. But one may be taxed in your country of his residence, as per the taxation rules of the country. Additionally, balances in the FCNR account can be freely repatriated outside India.
If the fund amount is withdrawn before completion of one year, no interest is paid to the depositor. Although, funds can be withdrawn at a premature date, it is subjected to a penal interest of 1%.
What else can your FCNR account used for?
FCNR deposits can also be used to make local payments. However, one is advised to transfer balance to NRE account before making payments, as it’s more suitable. Banks also provide loans (rupee and foreign currency) to NRIs against collateral security of FCNR deposits.
Note: A nomination facility is also available with FCNR accounts. Your nominee can either be an NRI or a resident Indian. Additionally, NRIs can hold FCNR accounts jointly with other NRIs or residents who are close relatives.