NRI Guide to FCNR Accounts: Interest-Earning Without Currency Conversion
When a Non-Resident Indian (NRI) remits overseas income to his or her savings account in India, the foreign currency needs to be converted to Indian rupees - and this comes with a charge. But did you know that NRIs can save money in India directly in foreign currency without needing to convert it?
-
An FCNR account in India lets NRIs deposit their foreign earnings in Indian banks in their home currency while earning interest on it. FCNR deposits can be made in currencies such as the US dollar, British pound, euro, yen, Australian dollar, Singapore dollar, and Canadian dollar. Foreign currency accounts in India for NRIs are beneficial as they provide better conversion rates.
-
While an NRE account is also a bank account opened in India to park an NRI's foreign earnings, the currency deposited from overseas in an NRE account is converted to the rupee. The key advantage of an FCNR account is that there is no rupee valuation risk on such deposits as they are made directly in foreign currencies, making it ideal for NRI account holders.
-
The RBI's move to relax the interest rate cap, among other measures taken, led to a surge in foreign currency or FCNR deposits in India. In total, NRI deposits made in India more than doubled to $7.9 billion (Dh29 billion) in 2023 from $3.2 billion (Dh11.8 billion) in 2022, with FCNR account deposits making up $2.4 billion (Dh8.8 billion).
So what about other currencies in which FCNR deposits cannot be made?
As FCNR deposits can be made in currencies such as the US dollar, British pound, euro, yen, Australian dollar, Singapore dollar, and Canadian dollar, Indian ex-pats with other currencies looking to make deposits in FCNR accounts can make an FCNR deposit by using the escrow of your bank, but currency conversion charges will apply.
They can remit other currencies to their bank’s escrow, they then will convert to US dollars or any currency. If you use an escrow, forex charges will apply.
Given that FCNR accounts are used primarily for two reasons, firstly taxes are not incurred and secondly, forex charges don’t apply for the permitted currencies, hence FCNR accounts are in high demand among NRIs because of the temporary removal of the RBI-issued cap.
Also Read: What are the FEMA regulations for NRI for borrowing and lending in india?