FCNR Account and its Various Benefits

An FCNR account is a term deposit in foreign currency that can be opened by an NRI or a person of Indian origin. Read further to know more about the FCNR account and its advantages.

An FCNR account is a Foreign Currency Non-Residential Account that allows NRIs to invest their foreign currency earnings with Indian banks in the form of fixed deposits. The interest rates are fairly higher but may slightly vary with different currencies. An FCNR account can be opened in 9 currencies, as below:

  1. Canadian Dollars – CAD
  2. Japanese Yen- JPY
  3. Australian Dollars – AUD
  4. US Dollars – USD
  5. Pound Sterling – GBP
  6. Euro – Euro
  7. Hong Kong Dollar – HKD
  8. Swiss Franc – CHF
  9. Singapore Dollar – SGD

Benefits of an FCNR Account:

Some of the major benefits of an FCNR account are as below:

  • Protection Against Forex Rate Fluctuations: Since the FCNR deposit is maintained in the form of foreign denominations, the deposit is free from any risk of changing exchange rates while investing or while transferring the proceeds. Upon maturity, the principal amount and the interest are also transferred in foreign currency that eliminates chances of loss during the exchange.
  • Exemption From Income Tax: The interest earned on an FCNR deposit is tax-exempted in India as long as the deposit holder maintains the status of being an NRI or not an ordinary resident.
  • Joint Holding Option: There is an option to hold the FCNR account by two or more NRIs jointly. Moreover, you can make close Indian relatives a joint holder on a ‘former or survivor’ basis.
  • Flexible Investment Tenure: The investment with FCNR deposits can be done for flexible periods generally ranging from 1 to 5 years.
  • Easy Repatriability: Another advantage with FCNR deposits is that the principal amount and the interest earned is freely repatriable to the account holder’s country of residence without any restrictions.
  • Covers All Major Currencies: Though not available for all the currencies, an FCNR deposit can be opened with all the major currencies prevalent across the world, including Canadian, US, Britain, Japanese and Australian currencies.
  • Option to Raise Loans Against Deposit: The depositor can raise a loan in the form of the Indian rupee for investment in India. Also, one can raise a loan against an FCNR deposit, outside India in foreign currency. The repayment of the loan can be taken care of by the amount paid at the time of maturity.
  • Attractive Interest Rates: The interest rates offered on the FCNR deposits are regulated and monitored by RBI. Hence, the interest rates are generally the same in all the banks across India. Also, it may be slightly higher than the interest rates offered in NRI’s country of residence.

An Investment With Multiple Benefits:

Though there are multiple benefits of an FCNR account, such as attractive interest rates, free repatriability, and tax-free investment, you must make sure to open an FCNR account with a renowned bank to ensure deposit safety and smooth payback upon maturity. Also, you must check for penalties applicable at premature withdrawal and other bank-specific policies at the time of deposit.