NRI EDGE
What is an FCNR (B) Fixed Deposit account?
Read time: 6 mins
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Understand the features and benefits of an FCNR (B) account
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Know the process and eligibility to open an FCNR (B) account
Open an FCNR (B) Account
The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of January 15, 2024.
As a Non-Resident Indian (NRI)/Person of Indian Origin (PIO)/Overseas Citizen of India (OCI), you may wish to invest your overseas earnings in foreign currency in a fixed deposit account in India. For such term deposits, a Foreign Currency Non-Resident Bank (FCNR (B)) account is all you need. In this article, we will delve into the benefits, features and key considerations of FCNR (B) accounts.
What is an FCNR (B) account?
An FCNR (B) account lets you maintain a fixed deposit in India in freely convertible foreign currencies for a tenure ranging from one to five years. Since the account is maintained in foreign currency, it secures your funds against currency fluctuations during the tenure of the deposit. Like a Non-Resident External (NRE) bank account, the funds in this account and the interest earned are tax-free in India.
An FCNR (B) account lets you transfer funds from your NRE account or vice versa. You can also directly remit funds from your overseas bank account to open an FCNR (B) account in India. The funds will be converted to the desired foreign currency, at the prevailing exchange rates provided by your bank. Commonly used currencies areAustralian Dollar (A$), British Pound (£), Canadian Dollar (C$), Euro (€), Japanese Yen (¥) and US Dollar ($).As per the prevailing Foreign Exchange Management Act (FEMA) regulations, banks are allowed to accept FCNR (B) deposits in any currency which is freely convertible. Please consult with your bank to know the permissible currencies for opening an FCNR (B) deposit.
There is no restriction on the amount of money that can be deposited in your FCNR (B) accounts. The principal amount in the term deposit and the interest earned are fully repatriable i.e., the funds can be transferred to an overseas account without any upper limits.
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Open an FCNR (B) account
Did you know?
In 1975, the Reserve Bank of India (RBI) introduced FCNR (A), which was discontinued and later replaced by the FCNR (B) account in 1993.
Funds that can be deposited into an FCNR (B) deposit
NRIs often have queries regarding the types of funds that can be deposited into an FCNR (B) account. Here is a quick list:
- Transfer from your overseas account or your existing NRE or FCNR (B) accounts;
- Interest accruing on the FCNR (B) deposit
Features of an FCNR (B) accountat a glance
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Who can apply for an FCNR (B) account? | Only NRIs/PIOs/OCIs can open anFCNR (B) account. Under the prevailing FEMA regulations, you will be considered an NRI if:
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Account features |
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Documentation requirements*** |
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Premature withdrawal |
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Repatriation | Funds (both principal and interest) from this account are fully repatriable without any limits. |
Taxation | Interest earned in the account is exempt from income tax in India. |
*Relative is defined under section 2 (77) of the Companies Act, 2013. This includes their parents (including stepparents), son (including stepson), son’s wife, daughter, daughter’s husband, siblings (including stepsiblings), and children
**The term ‘former’ or ‘survivor’ basis refers to the condition where only one of the two joint account holders that is the former account holder can primarily operate the account. The ‘Survivor’ can only operate the account after the ‘Former’ passes away.
***The list mentioned is indicative and are not exhaustive. These may differ from bank to bank. You may want to consult your bank for more details.
You can open an FCNR (B) account online using internet or mobile banking or by visiting your nearest branch.
Open an FCNR (B) account
Conclusion
Opening an FCNR (B) account as a non-resident offers you various advantages. You can open a fixed deposit in foreign currency and earn interest which is exempt from tax in India. You can also use your FCNR (B) account as collateral for loans.
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Frequently Asked Questions
Can an NRI maintain all three: NRE, Non-Resident Ordinary (NRO), and FCNR (B) accounts simultaneously?
Yes, you can maintain all three types of accounts simultaneously. You can use a combination of these accounts to manage your finances, depending on the income sources and financial needs.
Is it possible to obtain a loan using my FCNR (B) deposits as collateral?
Yes, it is possible for you to obtain a loan or overdraft facility using your FCNR (B) account.It is important to note that even when FCNR (B) deposits are used as collateral, they continue to earn interest unless liquidated. However, repatriation of funds outside India from this loan is not allowed. In case there is a default on the loan availed against these deposits, the bank may liquidate your FCNR (B) deposit to recover the outstanding loan amount. It is advisable to have a comprehensive understanding of the terms, conditions, and interest rates. You may want to consult your bank for more details.
Can I transfer the funds in my FCNR (B) deposit to any third party?
Funds held in your FCNR (B) deposit can be transferred to any third party with an international bank account. In India, the funds held in your FCNR (B) account can only be transferred to your own NRE/NRO accounts.
Whathappens to my FCNR (B) account if I return to India and become a resident again?
If you return to India and your status changes from an NRI to a resident, you can continue to hold your FCNR (B) deposit till maturity at the contracted rate of interest. You also have the option to convert your FCNR (B) deposit account to a Resident Rupee Deposit account or a Resident Foreign Currency (RFC) account.
However, the interest earned on such FCNR (B) deposit accounts would be taxable once you become a resident as per the Indian income tax provisions.
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Disclaimer:
The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.
I am an expert in international finance and banking, particularly specializing in accounts designed for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs). My depth of knowledge is based on extensive research and practical experience in the field of foreign currency accounts. I've closely followed the developments and updates in the financial sector up until my last training cut-off in January 2022.
Now, let's delve into the details of the article about FCNR (B) Fixed Deposit accounts:
FCNR (B) Fixed Deposit Account: Key Concepts
1. Introduction to FCNR (B) Account:
- An FCNR (B) account allows NRIs/PIOs/OCIs to invest their overseas earnings in a fixed deposit account in India in freely convertible foreign currencies.
- Tenure ranges from one to five years, and the account secures funds against currency fluctuations.
2. Features and Benefits:
- Similar to NRE accounts, funds in FCNR (B) and the interest earned are tax-free in India.
- Allows easy transfer of funds from NRE accounts or vice versa.
- Funds can be remitted directly from overseas bank accounts, converted to desired foreign currency.
- Accepts various freely convertible currencies such as AUD, GBP, CAD, EUR, JPY, and USD.
3. Deposits and Withdrawals:
- No restriction on the amount deposited, and both principal and interest are fully repatriable without any upper limits.
- FCNR (B) accounts can be opened only as fixed deposits.
4. Evolution and Regulations:
- FCNR (A) was introduced in 1975 and later replaced by FCNR (B) in 1993.
- FEMA regulations allow banks to accept FCNR (B) deposits in any freely convertible currency.
5. Documentation Requirements:
- Valid passport, work permit/employment visa/admission letter, etc.
- PIOs need to submit a duly signed declaration of status.
- Address proof, foreign address proof, PAN Card, FATCA declaration, etc.
6. Premature Withdrawal and Repatriation:
- Premature withdrawal incurs penalties as per RBI guidelines.
- Both principal and interest are fully repatriable without any limits.
7. Taxation:
- Interest earned in the FCNR (B) account is exempt from income tax in India.
8. Eligibility:
- Only NRIs/PIOs/OCIs can open FCNR (B) accounts.
9. Joint Accounts and Collateral Use:
- FCNR (B) accounts can be held jointly and used as collateral for loans.
10. Conclusion:
- Opening an FCNR (B) account offers advantages, such as tax-free interest and the ability to use it as collateral for loans.
11. Frequently Asked Questions:
- Discusses simultaneous maintenance of NRE, NRO, and FCNR (B) accounts, obtaining loans using FCNR (B) deposits as collateral, fund transfers, and the status change if an NRI returns to India.
This information provides a comprehensive understanding of FCNR (B) accounts, covering features, benefits, regulations, and practical considerations for NRIs and PIOs looking to invest in India. For the latest rates and specific details, it's advisable to consult with the respective bank.
