With the exception of persons of Indian origin from Bangladesh and Pakistan, all NRIs and PIOs are eligible to maintain an FCNR account with an authorised bank in India.
Accounts may be opened with funds remitted
from outside, existing NRE/ FCNR accounts, etc.
Remittances should be in the designated
currency.
Conversion to currency other than the
designated currency also permitted at the risk and cost of the
remitter.
Features of FCNR Account
The account can be opened with funds remitted from abroad, or transferred from an existing NRE/FCNR account.
FCNR accounts can be opened with designated currencies, which are: GBP, USD, Deutsche Mark, Japanese Yen and the Euro.
Conversion to another designated currency is permitted at a cost to the account holder.
Only term deposits can be maintained in FCNR accounts, in a time range of 6 months to 3 years.
As per RBI guidelines, banks are free to offer interest on FCNR deposits below LIBOR rates, less 25 basis points for deposits between 6 months to one year, and LIBOR rates plus 50 basis points for deposits over a year.
Banks are also free to decide on a fixed or a floating rate of interest on FCNR term deposits.
Interest rates are reviewed periodically and determined by directives from the Reserve Bank (Department of Banking Operations and Development).
The account holder can choose the periodicity of interest, from half-yearly to annual payments. The interest can be credited to a new FCNR (B) account or a NRE/NRO account.
For permissible debits and credits, the regulations for FCNR accounts are similar to the NRE accounts.
For conversion of currencies, from designated currency to rupees and vice versa, the day’s rate of conversion will apply.
Funds from the FCNR account are allowed to move within the country at no extra cost to the account holder.
For loans and overdrafts against FCNR accounts, the same conditions as the NRE accounts apply.
In case of premature withdrawal of the FCNR Term Deposit, a penalty is levied. Interest paid on the account is calculated at a 1% below the committed rate if accounts are closed prematurely.
However, no interest is paid on deposits held for less than 6 months, and a penalty would have to be paid as per directives from the apex bank. The RBI guidelines prevail on these terms, issued as and when required.
FCNR A/c after Change in Resident Status
NRI deposits such as the FCNR can continue till the maturity date at the contracted rate of interest even after the account holder’s resident status changes to resident Indian.
However, except for interest rates and reserve requirements of FCNR deposits, these accounts are treated as resident accounts effective from the account holder’s date of return to India.
On maturity, these accounts are converted to either an RFC account or the Resident Rupee Deposit account.
As for joint accounts, the same rules as those for NRE accounts apply to FCNR deposits too.
For repatriation of funds from the FCNR account, the same conditions as those for NRE accounts apply.
The RBI does not provide any guarantee on foreign exchange.
Other Features -
Reserve Bank will not provide foreign
exchange guarantee.
Lending of resources mobilized by authorized
dealers under these accounts are not subject to any interest
rate stipulations.
