What is FCNR deposit

Exploring the Benefits of FCNR Deposits for NRIs
4 min
9-May-2024

Savings have always been a cornerstone of responsible financial planning. In the past, our grandparents diligently set aside a portion of their income for emergencies. However, these savings were entirely liquid and didn't earn any interest.

As the banking and financial industry progressed, new options emerged to help maximize our savings potential. Among these, recurring deposits and fixed deposits have become two of the most popular choices. Fixed deposits, in particular, have gained widespread favor among Indian households. They offer guaranteed returns over your chosen timeframe, providing both security and growth.

An example is the Bajaj Finance FD, which offers interest rates up to 8.85% per annum, and bookings can be made through the Bajaj Finserv website or app, offering enhanced convenience.

However, such savings options primarily cater to Indian citizens. For Indian citizens living outside the country, the government has a separate investment method called FCNR deposit. FCNR gives Indian residents who stay abroad the option to hold term deposits in India in a foreign currency.

What is FCNR deposit

FCNR stands for Foreign Currency Non-Resident. An FCNR deposit is a type of term deposit account designed specifically for Non-Resident Indians (NRIs). With this, any Indian citizen who doesn’t reside in the country may open a term deposit account within India. If you are a non-resident Indian, overseas citizen of India, or a person of Indian origin and want to invest your overseas income earned in foreign currency in a fixed deposit account in India, then FCNR (B) is a great option.

What is FCNR (B)?

The ‘B’ here is just an iteration of the first version of the same scheme that was initially rolled out. In 1975, the Indian government rolled out the FCNR (A) to encourage deposits by NRIs. Back then, the Reserve Bank of India was aiming to minimise risks faced by depositors, and for this reason, it guaranteed the exchange rate prevalent at the time of making the deposit. This meant that the risks associated with foreign exchange were borne by the apex bank and, therefore, the Government of India. However, in 1993, the Central Bank replaced FCNR (A) with the current FCNR (B). This was primarily done to do away with the exchange rate guarantee that it had initially introduced.

FCNR is similar to a fixed deposit scheme for Indian citizens. The only difference is that an FCNR deposit is held in foreign currency. These deposits can comprise currencies like the US Dollar, Canadian Dollar, Euro, Pound, or Japanese Yen. Since the deposit holds foreign currencies, the risks associated with fluctuations in the currency exchange rate are also eliminated. There is also no upper limit to the money you can hold in an FCNR deposit.

Features of FCNR deposits

  • Risk-free investment - Your savings are held in the foreign currency you choose (USD, GBP, etc.). This means their value won't be impacted if the Indian rupee weakens against that currency, providing stability and preserving your earnings.
  • Income tax exemption - Interest earned through FCNR deposits is exempted from taxation in India.
  • Joint ownership - An FCNR account can be jointly held by two or more NRIs or with a resident relative. The resident relative may include your parents, siblings, or children. However, sharing the account with another person residing in India is not allowed.
  • Long-term plan - FCNR can only be opened as a term deposit account, not a savings account. The primary difference between the two is that a savings deposit is where you can deposit and withdraw money at your convenience. A term deposit holds the principal amount for a defined period chosen while opening the account.
  • Collateral for loans - FCNR accounts can also be used as collateral to avail of a loan from a bank. Some banks also offer loans to companies or businesses against an FCNR deposit.

If you are seeking secure investments within India, you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.85% p.a.

Documents required to open an FCNR deposit account

If you want to open an FCNR deposit account, you must furnish some documents, which is standard procedure in any banking process. These include:

  • A valid passport or proof validating your status as a POI or OCI
  • A valid address proof
  • PAN Card
  • Coloured passport-sized photographs

Conclusion

The FCNR deposit scheme is a smart choice for NRIs looking to invest and grow their wealth within India. This scheme allows NRIs to hold term deposits in a foreign currency, protecting their earnings from exchange rate fluctuations. FCNR deposits also offer flexibility, as they can serve as collateral for loans. Plus, their easy joint ownership options and potential for long-term planning make them an attractive part of any diversified investment strategy.

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Bajaj Finserv app for all your financial needs and goals

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.