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Frequently Asked Questions about Foreign Currency Non-Resident (FCNR) Accounts?

Updated on Apr 12, 2022
Foreign Currency

The FCNR account is an account that can be opened in foreign currency only with an Indian bank, as the account name suggests. This type of account can be opened for a minimum period of 1 year to a maximum of 5 years. No deposits in the form of Indian Rupee can be made into this account. Regular interest is paid on this account by the bank. To learn more about FCNR account, see the below FAQ's

Frequently Asked Questions:

Who can open an FCNR Account?

Any Non-Resident Indian or Person of Indian Origin can open an FCNR Account. Individuals from Bangladesh & Pakistan can also open FCNR Accounts but would need the prior permission of Reserve Bank of India (RBI) to do so. A person can mean an individual, a company, a partnership, a trust, etc. can open an FCNR Account.

Who is an NRI?

An NRI or Non-Resident Indian is an individual who resides outside India but is an Indian Citizen.

Who is a PIO?

A 'Person of Indian Origin (PIO)' is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions:

  • Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
  • Who belonged to a territory that became part of India after the 15th day of August 1947; or
  • Who is a child or a grandchild or a great-grandchild of a citizen of India or of a person referred to in clause (a) or (b); or
  • Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c)

A PIO will include an 'Overseas Citizen of India' cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955. Such an OCI Card holder should also be a person resident outside India.

Can the FCNR Account be a Joint Account?

Yes, the FCNR Account can be a Joint Account, provided all the account holders are either NRIs or PIOs or any combination of the two.

What is the Currency of the FCNR Account?

The FCNR Account can be in any foreign currency which is freely convertible.

What kind of accounts can be opened as an FCNR Account?

FCNR Account can be a Fixed Deposit Account only.

What is the period of FCNR Fixed Deposits?

The Fixed Deposit can be for a period between one year to five years. The term cannot be less than one year.

What are the permitted credits into an FCNR Account?

The permitted credits into the FCNR Account are:

  • Inward Remittances from outside India
  • Interest Accruing on the account balance
  • Interest on Investment
  • Transfer from other FCNR Account
  • Maturity proceeds of any investment made originally from this account
  • Current Income like rent, dividend, pension, Interest, etc.
  • Foreign currency suitably converted into INR at the forex rates of the bank on the given day

What are the permitted debits from the FCNR Account?

The permitted debits are:

  • Local Disbursements
  • Remittance outside India
  • Transfer to another FCNR Account
  • Investments in India

How much can be repatriated abroad from the FCNR Account?

FCNR account balance can be fully repatriated, which means the total balance of the FCNR account can be sent abroad.

What is the taxation on the FCNR Account?

Income earned in the account is exempt from Income Tax in India. The balance is also exempt from Wealth Tax. Which means that this account is tax-free, in India.

Can Loans be availed in India on the security of the FCNR Account?

Yes, the banks can give loans on the security of the FCNR Account to the account holder or third parties, as per their lending norms. There are no limits prescribed by the RBI on the same.

Where can the loans be utilized?

The loans taken on the basis of the FCNR account cannot be repatriated abroad. It can be used in India only for the purposes specified in the loan application as read along with the regulations.

How can the loans be repaid if these are taken by the account holder?

The repayment of the loan can be done by inward remittance. It can also be repaid by utilizing the balance held by the account holder in their NRO Accounts.

Can the person taking the loan utilize premature withdrawals?

No, premature withdrawals are not allowed if the loan has been taken basis the security of the FCNR Account.

Can Loans be availed by the NRI or PIO outside India?

The banks can extend loans to the NRI or PIO from their foreign branches or foreign correspondents who are based outside India. Such loans can be also given to third parties, at the request of the account holder. The purposes for which this loan is taken should be as per the local laws or in other words, should be for purposes permitted by law in the country it is taken. The balance of the FCNR account can act as collateral security, for the same.

What is the Rate of Interest of FCNR Account?

The rate of interest on FCNR Account is based on the directives of RBI under the guidelines issued by the Department of Banking Regulations. These are generally in the range of 1.5% to 2.5% per annum.

Can the FCNR Account be operated under a Power of Attorney (POA)?

Yes, the FCNR Account can be operated under a POA. There are restrictions on the application of the POA. These restrictions are applicable to withdrawals for local payments or remittance to the account from abroad.

What happens when there is a change in the status of the Non-Resident to Resident, as regards FCNR Account?

The FCNR Account is allowed to be continued till maturity and at the contracted rate of interest, if it is the will of the account holder, to continue the same. On maturity, the bank should convert the FCNR account deposits into INR Deposits or a Resident Foreign currency(RFC) account. The depositor should be eligible to open an RFC Account. This option is also available to the account holder.

What is the time limit for the change of the account status of the person who becomes a Resident from Non-Resident?

The account holder should inform his bank immediately of the change in status & the bank will act accordingly.

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