Every person, whether a resident of India or an NRI, needs a place to store their assets and savings. It is essential to have a bank account for keeping all the currencies safely without the fear of them getting stolen or lost. A person can withdraw the funds from it whenever needed and apply for loans. They can also use different debit and credit cards for the purpose.
One of the essential kinds of investments for NRIs is an FCNR account where they can invest in equities and bank accounts to get assured returns. The merger of NRI portfolio investments with foreign portfolio investments with revised interest rates has encouraged NRIs to invest in India. A Foreign Currency Non-Resident bank account is a term deposit account that allows investors to transfer their foreign income to India in the same currency as their resident country. They can effectively hedge against the risks of exchange rates. According to the Reserve Bank of India (RBI), an NRI or PIO can open this account in India.
What are the features of the account?
A foreign currency account has savings in foreign denomination. It is not a savings account, but a term deposit account with a minimum tenure of a year and a maximum tenure of five years. The interest income on this account is tax-free in India. The principal, as well as the interest, are freely repatriable to the NRIs resident country. They can get both rupees as well as foreign currency loans against their deposits in the account.
What makes these accounts attractive?
Among a wide range of options available for NRIs to invest in India, these accounts are preferred by most of them because the currencies can get freely converted. The kinds of currencies include the US Dollar, Pound Sterling, Japanese Yen, Euro, Australian Dollar, Canadian Dollar, Singapore Dollar, Swiss Franc, Hong Kong Dollar, and Danish Krone others.
The deposits in these foreign currency accounts are exempt from Indian Income Tax. Accountholders can use internet banking or visit the bank’s branch for making the transfer. They can also take loans using this account. The loan is available in foreign currency that NRIs and even Indian corporates can use against the deposit at select Indian banks according to the RBI guidelines. They can raise funds against their accounts in Indian and foreign currencies from any part of the world. Check the bank policies before submitting a loan application as each of them have different regulation for repayment.
The FCNR rates vary with the kind of currency and the tenure of the deposit set by the bank. The tenure is from a year to five years. If the account holder withdraws within the first year, there is no interest payment. But if they withdraw it within the tenure, the banks can charge them a penalty. Open this account by sending remittance from overseas by internet banking or by submitting a request to the bank branch directly.