Parking overseas earnings in India without currency worries is a common challenge for NRIs. FCNR accounts allow holding funds in select foreign currencies while complying with Indian banking rules.
This article explains what an FCNR account is, how an FCNR deposit works, where it differs from NRE options, who can open it, key rules on tenure and interest, and practical checks before applying.
What is an FCNR account, and how does an FCNR deposit work?
An FCNR account is a term deposit for non-residents in which funds are placed in a permitted foreign currency and held for a fixed period. An IDFC FIRST Bank FCNR deposit keeps both principal and interest in the chosen currency, subject to the bank’s policies and regulations. It is not a savings account. Banks publish currency-specific tenures and rates, and interest is paid according to the method they specify.At a glance
- Currencies: Deposit in permitted currencies such as USD, GBP and EUR as listed by the bank
- Term: Fixed terms within the window allowed by regulation
- Repatriation: Principal and interest are generally repatriable, following due process
- Premature withdrawal: May reduce interest as per policy
FCNR or NRE, and where an NRE fixed deposit fits
Both serve non-resident needs, yet they are structured differently. FCNR deposits hold funds in foreign currency for the full term, which can help reduce rupee conversion exposure during that period. An NRE fixed deposit is rupee-denominated. Funds are converted into INR at the time of deposit, and interest is paid in Indian Rupees. Many NRIs choose FCNR when future expenses are likely in the same foreign currency, and consider NRE when expected spending is in India.Eligibility and documents
Here are the eligibility criteria and documents required:- Eligible customers: Non-resident Indians and Persons of Indian Origin, as defined by regulation
- Account type: Single or joint accounts with eligible non-residents
- Nomination: Nomination facility is usually available
- Documents: Passport, valid visa or residence proof, overseas address proof, PAN, and completed KYC forms asked by the bank
Currency, tenure, interest and tax points
Here you will explore the currency, tenure, interest and tax points:- Currencies: Only those listed by the bank and allowed by regulation
- Tenor: Fixed terms within the permitted range. Check the minimum period for interest payment eligibility
- Interest: Method and payout depend on currency and tenure. Rates can vary over time
- Tax: Subject to prevailing Indian tax rules for non-residents. Consider independent tax advice for your situation
Funding, renewal and closure
Let us explore in detail, funding, renewal, and closure:- Funding: From overseas through normal banking channels or as permitted
- Renewal: Instructions can be set to renew on maturity at the rate available on the renewal date
- Premature withdrawal: Allowed under stated conditions. Interest may be reduced or not paid if the minimum period is not met
- Closure and repatriation: Follow the bank’s process for documentation and compliance checks
Practical pointers before you apply
Here are the practical pointers before you apply:- Currency needs: Decide whether your near-term goals need INR or foreign currency
- Bank list: Review the bank’s current list of currencies and available tenures
- Maturity mapping: Map deposit maturity to known milestones like tuition or property payments
- Conversion costs: Understand conversion costs if you plan to change currency at funding or maturity
- KYC hygiene: Keep KYC and contact details updated to avoid delays
- Records: Save acknowledgement copies of remittances and instructions
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