Foreign Currency Non-Resident [Bank] deposits, commonly called FCNR(B) deposits, are term deposits maintained in designated foreign currencies with Indian banks by eligible non-residents, offering full repatriability of principal and interest and insulation from INR exchange risk during the tenor. These deposits can generally be opened for tenors from 1 to 5 years, with interest payment/compounding conventions prescribed by RBI and rate ceilings linked to benchmark rates as notified.
Eligibility
- Eligible categories include Non-Resident Indians (NRIs) and Overseas Citizens of India/Persons of Indian Origin, subject to FEMA and RBI regulations as implemented through bank onboarding and KYC.
- Individuals returning to India for permanent settlement may not open fresh FCNR(B) deposits; existing deposits may continue till maturity at contracted rates, while for all other purposes they are treated as resident deposits from the date of return.
Currencies and Tenor
- Banks typically offer FCNR(B) in major freely convertible currencies such as USD, GBP, EUR, JPY, AUD, and CAD, with product availability varying by bank policy.
- Permissible maturity is generally from 1 year up to 5 years, with no recurring deposit variant allowed under the scheme.
Interest and Rate Ceilings
- RBI prescribes ceilings for FCNR(B) interest rates referenced to benchmarks (e.g., LIBOR/ARR or swap rates) with specified basis point caps by tenor; banks set board-approved rates within these ceilings.
- RBI temporarily relaxed the ceilings from December 6, 2024 to March 31, 2025, permitting fresh FCNR(B) deposits at up to ARR + 400 bps for 1–<3 years and ARR + 500 bps for 3–5 years, subject to bank discretion.
Interest Computation and Payout
- Interest is calculated on a 360-day year basis, typically paid at 180-day intervals and for the remaining actual days, with an option to receive interest at maturity with compounding as per scheme provisions.
- Interest is paid in the same foreign currency as the deposit, preserving currency risk protection during the term.
Funding and Opening Methods
- Deposits may be funded by remittances from abroad through normal banking channels or by transfer from eligible NRE/FCNR(B) accounts maintained in India, as per bank procedures.
- Leading banks outline a simple process: choose currency and tenor, provide KYC and residency documents, specify source account/remittance, and submit account-opening/term-deposit instructions online or at designated NRI branches.
Documentation and KYC
- Banks will collect standard KYC for NRI/OCI customers, including passport, valid visa/OCI, proof of overseas address, PAN (if applicable), and FATCA/CRS declarations, aligning with AML norms and FEMA requirements.
- Additional documentation may apply where deposits are funded from existing NRE/FCNR(B) accounts or where mandate/POA holders place the deposit under bank policy.
Premature Withdrawal Conditions
- Premature withdrawal is permitted on request; if closed before completing one year, no interest is payable under the scheme, while beyond one year interest is paid for the completed period at applicable rates and bank-disclosed penalties/swap cost recovery may apply.
- Internal bank policies specify penalty grids and any swap cost recovery, which must be pre-disclosed at the time of booking; customers should review the bank’s FCNR(B) policy or key facts statement.
Loans Against FCNR(B)
- Banks may allow loans/overdrafts against FCNR(B) deposits within regulatory limits; borrowing in INR or foreign currency is common, typically up to a high percentage of deposit value, without breaking the deposit.
- Proceeds of such loans are subject to end-use and repatriation restrictions; despite lien/pledge, the deposit continues to earn interest unless liquidated.
Tax Treatment (India)
- Interest income on FCNR(B) deposits is generally exempt from Indian income tax for eligible non-residents under prevailing provisions; customers should confirm their specific status and any changes on returning to India.
- Upon change to resident status, tax treatment may differ post-maturity when funds move to resident/RFC accounts, and customers should seek tax advice consistent with FEMA and Income-tax provisions.
Status Change: Return to India
- On permanent return, existing FCNR(B) deposits may run to original maturity at the contracted rate; for all other purposes they are treated as resident deposits from return date.
- At maturity, such deposits must be converted into a Resident Rupee Deposit or RFC account at the depositor’s option, with interest thereafter as applicable to the chosen account type. To know the Benefits of RFC Accounts read: YOU CAN CONVERT YOUR FCNR DEPOSIT TO RESIDENT FOREIGN CURRENCY (RFC) ACCOUNT
Repatriation and Transferability
- Principal and interest are fully repatriable for eligible non-residents, and banks facilitate outward remittance or transfer to NRE/FCNR(B)/overseas accounts per instruction.
- Inter-account transfers between NRE and FCNR(B) are allowed under the scheme; however, switching between deposit types before maturity is treated as premature withdrawal and subject to associated conditions.
Operational Checklist to Open
- Select currency and tenor aligned to cash flow needs and rate outlook; confirm bank’s current rates and any temporary ceiling relaxations.
- Arrange funding via inward remittance or transfer from NRE/FCNR(B), complete KYC and declarations, and obtain written disclosure of interest computation, penalties, and repatriation rules.
Bank-Level Nuances
- Banks may differ on available currencies, minimum deposit amounts, compounding options, and cut-offs for value dating and interest payment; consult the bank’s FCNR(B) product page and deposit policy.
- Some banks restrict certain currencies/tenors operationally (e.g., limiting select currencies to 1-year terms during specific periods), reflecting treasury and liquidity considerations.
FAQs
- Who can open? Eligible NRIs/OCIs meeting KYC and FEMA criteria with an Indian bank offering FCNR(B).
- What is the tenor? Typically 1 to 5 years; no recurring deposit format under the scheme.
- Are funds fully repatriable? Yes, principal and interest in foreign currency for eligible non-residents.
- What about premature closure? Allowed; no interest if closed before 1 year; beyond 1 year, interest for the run period with bank-disclosed penalties where applicable.
Note: Rate ceilings are periodically updated by RBI; verify current ceilings and bank-offered rates at the time of opening, especially in light of temporary relaxations through March 31, 2025.
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