Non-Resident Indians (NRIs) may find the globally competitive fixed deposit (FD) interest rates in India currently too good to miss. Indian banks, such as the State Bank of India (SBI), RBL Bank, and Federal Bank, offer FD accounts in six major foreign currencies: The US Dollar, the British Pound (GBP), Canadian Dollar (CAD), the Australian Dollar (AUD), and Japanese Yen (JPY) tax-free.
Since NRIs do not satisfy the residency clause of the Income Tax Act 1961, they might still be interested in such FDs available for them in their home country.
SBI provides Foreign Currency Non-Resident Accounts (FCNRs) for FDs in the US dollar, UK pound, Canadian dollar, Australian Dollar, and Japanese Yen.
Federal Bank offers FCNR deposits in 10 foreign currencies with interest rates ranging from 4.25 to 5.05 per cent for the $ FCNR deposits.
In October 2022, the Bank of Baroda (BoB) raised interest rates on FCNR fixed deposits by 135 basis points (1.35 per cent) across various currencies offered.
For ICICI Bank , the minimum amount for FCNR is $1000 and 1000 GBP. For Singapore, Canadian and Australian dollars, the minimum amount is 2000 SGD, CAD, and AUD, respectively, and for Hong Kong dollars, it is 10,000 HKD.
Virendra Somwanshi, head of wealth management, capital markets and NRI, Bank of Baroda (BoB), said an NRI could open a non-resident external (NRE) or non-resident ordinary (NRO) savings account through any Indian bank or overseas branch.
If the country where the NRI resides has no Indian bank branch, they can send a filled account opening form after downloading it online, with know-your-customer (KYC) documents such as passport, visa, Overseas Citizen of India (OCI), or People of Indian origin (PIO) card details and residence proof.
The Indian High Commission, consulate, or notary public will verify the documents before the banks accept them for opening NRE/NRO accounts.
“Also, at the time of making the deposit in the FCNR account, full names, addresses, and specimen signatures of the depositors must be lodged with the bank,” Somwanshi added.
Rathish R, senior vice president and country head for deposits, fee income, and business banking at Federal Bank, said the payments could be made through SWIFT transfer or telegraphic transfers for FCNR deposits. He, however, said that only NRIs and PIOs could open an FCNR account and not foreign citizens.
An NRI can open three types of bank accounts in India: NRE, NRO, and FCNR.
Aarti Raote, Partner, Deloitte India, said that te (FCNR) permits a non-resident Indians to invest in foreign currency deposits in India. The deposits would be nominated in foreign currency and hence there would not be any forex losses.
"The interest earned from such deposits is not liable to tax in India. The amounts post maturity are repatriable," Raote further added.
Rathish of Federal Bank said a person with an NRE or NRO could also open an FD or recurring deposit account (RD) as there is no regulatory restriction.
The interest rates on FDs and RDs are higher than the savings accounts. The minimum tenure of FD/RD is one year in the case of NRE, while RD accounts can be opened in a specific time frame.
NRIs don’t need to visit India for FCNR term deposits, and the requirement of an NRE/NRO account is not essential to open an FCNR account.
FCNR account holders can also get a loan, but the maximum sanction amount varies according to the FCNR currency deposit and banking policies.
“But the loan cannot be credited to the NRE savings account. It will be credited to the NRO account for domestic use,” added Somwanshi.
Also, as per RBI guidelines, no interest will be paid on the FCNR deposit if it is prematurely closed before one year.
FCNR deposits are accepted for a minimum period of 12 months to a maximum of five years, and interest on such deposits will be paid as per the request of the account holder (half-yearly, yearly, or on the maturity of the term deposit).
