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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 are Australian 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) account at a glance

Please note, tables are best viewed on desktop and in landscape mode on mobile phone

Who can apply for an FCNR (B) account?

Only NRIs/PIOs/OCIs can open an FCNR (B) account. Under the prevailing FEMA regulations, you will be considered an NRI if:

  • You are residing overseas (except Nepal or Bhutan) for more than 182 days in one Financial Year (April-March); or

  • You have demonstrated an intent with supported documents to reside outside India for an uncertain period:

    • Resident Indian professionals before going abroad for employment

    • Students planning to study abroad

    • Seafarers who work on international ships

Account features

  • Can be opened only as fixed deposits.

  • Protects funds from currency fluctuation risk as the deposit is maintained in foreign currency.

  • Can be held jointly with two or more NRIs/PIOs, or a resident relative* on a former or survivor** basis.

  • A resident relative can operate the deposit as a joint holder on the NRI’s behalf during their lifetime, provided they are Power of Attorney (PoA) holders.

  • Can be used as a collateral for loans. However, repatriation of the funds from this loan is not allowed.

Documentation requirements***

  • Valid passport;

  • Valid work permit/employment visa/admission letter, etc.;

  • PIOs needs to submit the duly signed and filled-in form for declaration of status;

  • Address proof: Valid Driving license/passport/Voter’s ID/Aadhaar Card;

  • Foreign address proof: Copy of passport and visa;

  • For seafarer's account: Copy of passport and visa, contract letter, declaration letter etc.;

  • Permanent Account Number (PAN) Card or, in the absence of a PAN card, Form 60, if applicable;

  • Foreign Account Tax Compliance Act (FATCA) declaration as applicable for the United States (US) or for the United Kingdom (UK), Canada or any of the 100+ countries that have adopted CRS.

Premature withdrawal

  • Before completion of one year: No interest is paid.

  • After completion of one year: Interest will be calculated for the period for which the deposit was held. 
    As per the RBI guidelines, your bank may levy a penalty on premature withdrawal. However, banks are required to disclose the components of the penalty at the time of opening of the FCNR (B) account. You may want to consult your bank for more details.

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

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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.

What happens 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.  

View More

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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.



 

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