An account that can be opened with an Indian bank by a Non Resident Indian or a Person of Indian Origin in foreign currency is FCNR (B) account. The letter B in FCNR (B) stands for the word ‘Bank’. It is an account that allows the NRI to keep his deposits in foreign currency. Hassles of conversion can be reduced through such types of accounts.
Features of FCNR account
- The account is maintained in foreign currency. Pound sterling, Australian dollar, Canadian dollar, Japanese Yen, Euro, United States dollar are few currency types in which an FCNR account can be opened today.
- The account can be opened by a Non Resident Indian or Person of Indian origin and only an NRI or PIO can be joint holder to this account.
- Only term deposit schemes are available to this account type and the period can be more than a year and a maximum of 5 years. If the account holder so wishes these accounts can also be transferred to other NRE/FCNR accounts before maturity period. Such transfers are subjected to penalties that are charged for premature withdrawals of the deposit.
- Currency in the account is convertible to Indian currency freely.
- Overseas corporate bodies (OCB) with at least 60% of the corporate body owned by NRIs were allowed to avail FCNR deposit schemes (prior September 2003). As on today the already existing FCNR accounts of OCBs can run till maturity but further renewal may not be possible.
- Reserve Bank of India states that interest rate on term deposit schemes are to be fixed by board of directors of the bank (subject to RBI regulations).
- Interest rate on term deposit is payable after the end of first year and the interest from there on is compounded half yearly.
- Premature withdrawals of term deposit is allowed in this type of account and loss on interest earned, charges for swapping etc in the name of penalty is fixed by the bank where the term deposit is held. Instructions related to such penalties are mentioned by the bank in terms and conditions before the person opens an FCNR account. The same is applicable for account transfers from existing FCNR to other NRE/FCNR account.
- Renewal of term deposits is possible on maturity and the person who is willing to renew has to renew the account within 14 days after maturity. If not then the bank will have the flexibility to fix interest rate on further renewal and also if such renewed accounts are withdrawn before a fixed overdue period of scheme, then the banks can take back the interest paid in overdue period.
- Loans can be purchased against FCNR accounts and banks will have the right to change interest rate on term deposit schemes when a loan is taken against this account.
- Loans from Indian banks in foreign currency are permissible against this account for an investment purpose in India.
Documents required for opening an FCNR (B) account:-
The following set of documents will be required by a NRI to open a FCNR account.
- Photocopy of passport of the account proposer
- Photocopy of Visa of the account proposer
- Statements from bank accounts held overseas
- A proof of current residence (foreign)