FCNR Account for NRIs
August 24 , 2012

The Foreign Currency Non Resident account or the FCNR account is a type of fixed deposit bank account held by NRIs in foreign currency. Such an account can be opened with most Indian banks, and earns a small, pre-defined regular interest. Features of FCNR account are detailed below.

FCNR account currencies and deposit term

FNCR account can be maintained in any freely convertible currencies like US Dollar, British Pound, Euro, Japanese Yen, Canadian Dollar, Australian Dollar, Swedish Krona, Danish Krone, Swiss Frank, New Zealand Dollar and so on.Deposit in FCNR account can have term of 1 year to 5 years.

Repatriation from FCNR account

This account is freely repatriable, meaning that money can be taken back abroad from it whenever the investor desires.Funds in FCNR account can be used for payments in India but since it is a term deposit account it is better to transfer funds to NRE account and then use it. Premature withdrawal from FCNR account attracts penalty.

Source of funds in FCNR account

Since it is a foreign currency account it follows that FCNR account can only be replenished by money earned outside India, or returns on such money. You can transfer money in it from your bank abroad or issue a foreign bank cheque. Foreign currency notes or travelers cheque can be tendered to this account on your India visit and funds from NRE account can be transferred to FCNR account.

Taxation in FCNR account

FCNR account is tax free in India however you might have to pay tax in the country of residence.

Interest in FCNR account

According to RBI rules deposits in FCNR account can earn interest of a few basis points (100 basis points make a percentage) above LIBOR. LIBOR is an internationally accepted reference interest rate for banks. Interest rate in FCNR deposit varies with currency and term. Presently 5 year deposit interest rate ranges from 3.5% on Japanese Yen to 7% on New Zealand Dollar.

Nomination, joint account, loan facility

NRE account has nomination facility.NRE account cannot be operated jointly with a resident. A close relative who is a resident can be a joint holder in FCNR account on 'former or survivor' basis but operate it only as Power of Attorney (PoA). Such a PoA can withdraw funds only for local payments. But a joint FCNR account can be opened with an NRI without these restrictions.Rupee loan can be availed against FCNR fixed deposit or recurring deposit.

Documents for opening NRO account

You need to submit completed application form signed and attested by your banker/Embassy of India/public notary or any person known to the bank and be accompanied by

- Copy of passport

- Copy of Visa

- Latest Overseas bank statement in original, latest overseas telephone/electricity bill in original as residential proof

Who should open FCNR account?

Since interest rate in FCNR account is abysmally low it makes sense to open one only if interest rates offered here are higher than what you'd earn in your country of residence and you do not wish to expose funds to exchange rate risks by converting them to Indian rupees.

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