With millions of Indians residing overseas, remittances to India constitute a significant portion of India’s foreign exchange inflows. India stands as one of the largest recipients of foreign currency globally making it essential for the banking sector in India to support this inflow.
To facilitate seamless transfers from their host countries to India, banks in India offer various international banking services tailored to the needs of non-resident Indians (NRIs).
Among these services, one standout offering is the Foreign Currency Non-Resident (FCNR) Deposit account. The FCNR Deposit account allows NRIs to deposit and maintain their funds in foreign currency denominations.
In this article, we will discuss What is FCNR deposits, the pros and cons of FCNR Accounts, how to open FCNR accounts, and much more.
Table of Contents
What is an FCNR Account?
FCNR stands for Foreign Currency Non-Resident Account which is a specialized deposit account offered by Indian banks to NRIs and PIO Card holders.
This account allows NRIs and PIOs to deposit and maintain their funds in foreign currency denominations, such as US dollars, British pounds, euros, or Japanese yen.
The FCNR Account enables NRIs to hold their savings in the currency of their earning or residing country providing a hedge against currency fluctuations.
Additionally, the FCNR Account typically offers attractive interest rates denominated in the respective foreign currencies, along with the flexibility to choose from various maturity periods.
The interest earned on FCNR Deposits is exempt from Indian income tax, making it a tax-efficient option for NRIs to grow their savings while residing abroad.
List of Currencies for FCNR Account
The following is the list of Currencies for the FCNR Account-
- US Dollar (USD)
- British Pound (GBP)
- Euro (EUR)
- Japanese Yen (JPY)
- Australian Dollar (AUD)
- Euro (EURO)
- Canadian Dollar (CAD)
Benefits of FCNR Account
The following are the benefits of FCNR Account-
- NRIs can hold their funds in foreign currency denominations, such as US dollars, British pounds, euros, or Japanese yen, providing them with currency diversification
- FCNR Accounts typically offer higher interest rates compared to domestic accounts in India
- The interest earned on FCNR Deposits is exempt from income tax
- Funds deposited in an FCNR Account are fully repatriable, meaning NRIs can freely transfer the principal amount and interest earned abroad without any restrictions
- FCNR Deposits offer flexibility in choosing maturity periods, typically ranging from 1 year to 5 years
Cons of FCNR Account
The following are the cons of FCNR Account-
- FCNR Deposits are denominated in foreign currencies which exposes the account to exchange rate fluctuation which can reduce your fund’s value due to fluctuation in exchange rate
- Withdrawals from FCNR Deposits before the maturity date may incur penalties or loss of interest earned
- Regulatory changes by the Reserve Bank of India (RBI) or the government can impact the terms and conditions of FCNR Accounts, including interest rates, repatriation rules, and taxation policies
How to Open an FCNR Account?
You can follow these steps to open FCNR Account-
- Visit the nearest branch of a bank offering FCNR Account services or explore online options for account opening available by visiting the official website of the bank
- Now, ask the bank representative for the application form for the FCNR Account and start to fill the account with information like name, address, PAN Card number, country of residence, and much more.
- Now, Submit the duly filled FCNR Account opening form along with the documents mentioned below
- Make an initial deposit of funds in the desired foreign currency to activate the FCNR Account
- The bank will verify the submitted documents and process the account opening request
- Once the account opening process is completed and approved, the FCNR Account will be activated, and account details will be provided to the account holder
Documents Required for FCNR Account
The following are the documents required for the FCNR Account
Identity Proof:
- Passport
- Aadhaar Card
- PAN Card
- Overseas Citizen of India (OCI) card (if applicable)
- Person of Indian Origin (PIO) card (if applicable)
Address Proof:
- Overseas residential address proof (utility bills, rental agreement, etc.)
- Proof of permanent address in India (if available)
- Visa and Work Permit (if applicable):
Other Document
- Recent passport-sized photographs
- PAN Card
- Aadhaar Card
How Transfer your Funds to the FCNR Account?
You can follow these steps to transfer your funds to the FCNR Account-
- You can transfer funds into your FCNR Account using wire transfer or SWIFT transfers. Contact your bank or financial institution where your funds are held and request an international wire transfer to your FCNR Account
- You’ll have to provide your FCNR Account details, including account number, beneficiary name, bank name, branch address, and SWIFT code/BIC (Bank Identifier Code) of the receiving bank in India
- Make sure to mention the currency (USD, GBP, EUR, etc.) in which you wish to transfer the funds and the desired amount to be remitted to your FCNR Account
- Complete the necessary transfer instructions and documentation required by your bank or financial institution for initiating the wire transfer
- The initiating bank will process the wire transfer request and send the funds through the international banking network
- Once the funds are successfully credited to your FCNR Account, you will receive confirmation from your Indian bank
Difference between FCNR, NRO, and NRE accounts
The following are the differences between FCNR, NRO, and NRE Account-
| FCNR Account | NRO Account | NRE Account |
| FCNR Account allows you to deposit funds into foreign currencies (e.g., USD, GBP, EUR, etc.) | NRO Account allows you to deposit the account in Indian Rupees (INR) | NRE Account allows you to deposit the account in Indian Rupees (INR) |
| It is Fully repatriable | It has a restricted repatriation | It is fully repatriable |
| You’ll be exempt from income tax | Subject to Income Tax Act (TDS applicable) | NRE Account is Tax-free (interest income) |
| FCNR account is a Fixed deposit account | NRO Account is a savings and fixed deposit account | NRE Account is a savings, current, and fixed deposits account |
| It can be used for parking foreign earnings without exchange rate risks | You can manage income earned in India | With an NRE Account, you can maintain earnings in India tax-efficiently |
FAQ
FCNR stands for Foreign Currency Non-Resident (FCNR) Deposit, which is a type of term deposit account maintained by Non-Resident Indians (NRIs) in foreign currencies in Indian banks.
FCNR accounts typically accept major foreign currencies such as US Dollar (USD), British Pound (GBP), Euro (EUR), Japanese Yen (JPY), Australian Dollar (AUD), etc.
The minimum tenure for an FCNR deposit is usually 1 year, and the maximum tenure can go up to 5 years.
No, FCNR deposits are exempt from income tax in India along with the interest earned on FCNR deposits is tax-free in India.
Yes, FCNR deposits can be held jointly with other NRIs. However, joint holding with residents is not permitted.
Yes, FCNR deposits can be used as collateral for loans in India. Banks offer loans against FCNR deposits at attractive interest rates.
Yes, premature withdrawal of FCNR deposits is allowed, but it may attract penalties or charges as per the bank’s terms and conditions.
I’m Shiv Kumar, a graduate with a passion for finance, marketing, and technology. My journey into finance started with a desire to understand money management and investing.
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