What is the full form of FCNR?

Introduction

Foreign Currency Non-Resident Account (FCNR) are NRI accounts regulated by RBI and FEMA. There are three types of NRI accounts NRE accounts, NRO accounts and FCNR accounts. Any person who is an Indian by origin or a citizen of India but not living in India are Non-Resident Indian (NRI) and NRO.

An NRI or PIO can open a bank account with any authorised Indian bank for saving and investment in India. It is an excellent opportunity for NRIs to open these accounts in India to get generate income and liberate themselves from currency exchange risk.

Definition of FCNR

FCNR stands for “Foreign Currency Non-Resident” account. FCNR accounts can be opened by an NRI in any of the foreign currencies approved by RBI. It is a “term deposit account”. You can keep your currency in any of the 9 currencies approved by RBI which are USD, EUR, AUD, GBP etc. The amount deposited in the FCNR account is considered the income of a resident from a foreign country. The rate of interest on these accounts varies concerning currency and tenure.

Types of FCNR accounts

FCNR accounts is a term deposit accounts opened by an authorised Indian bank for NRI or PIO. It was first started in 1975 by the name FCNR(A) to boost NRI deposits in India. The RBI promises to assure the rate of interest in these accounts to mitigate the risk of depositors.

In 1993 RBI reintroduced the FCNR accounts by the name FCNR(B). It has replaced the FCNR (A) accounts. In this account, RBI does not guarantee the exchange rate.

Benefits of FCNR accounts

The RBI allows the account holder to deposit money in any of the 9 currencies allowed by the account. These are the US dollar, Euro, Canadian Dollar, Japanese Yen, Australian dollar and British pound. Other benefits of FCNR accounts are as follows;

• The amount can be deposited for a minimum period of one year to a maximum of 5 years in FCNR accounts.

• The different bank offers attractive interest rates on the amount deposited.

• You can open account individual or joint account and you can open an account with one or more joint account holders.

• FCNR accounts also gave nomination facilities to any NRI, PIO or Indian resident.

• The interest received on the principal amount is non-taxable and recoverable in India.

• You are allowed to withdraw your money before the completion of the tenure by paying some pre-closure amount or a 1% penalty as per the contract of the bank.

• It allows you to keep your earnings in foreign currency.

• You have to keep a minimum of 10,000 balance in your account which is quite low.

Interest rates and eligibility criteria for FCNR accounts

The interest obtained on Foreign currency non-resident accounts is flexible and varies as per the tenure of the deposit. Here are the eligibility criteria for opening FCNR accounts;

• A person who is a citizen of India or a person of Indian origin is a non-resident Indian as mentioned in “Section-6 of the Income Tax Act 1961”.

• Any person who is resident in India for 182 days, or resident in India for 60 days and more in the previous financial year or resided in India for more than 365 days in the last four years is eligible to open an NRI account in India.

• Any person who is living outside India for employment, studies, business or vacation can open an NRI account.

• You must have a passport for opening an FCNR account.

• You should be an Indian citizen as per the “Citizenship Act 1955”.

Conclusion

The FCNR are the type of account opened by a Non-resident Indian or a person of Indian origin. You can open a foreign exchange non-resident account in any authorised Indian bank. You can not open this account jointly with any resident Indian. It is a term-deposit account but you can withdraw your amount before completing tenure by paying some penalty. One of the benefits of an FCNR account is that you can keep your money in foreign currency and avail of other benefits like tax-free income, and currency exchange. There is also an overdraft facility in these accounts.

FAQs

Q1. Documents required to open an FCNR account?

Ans: Opening an FCNR account is quite easy. You can open it from your Internet banking account or your NRE account. You must require a few documents to avail the benefit of Foreign exchange non-resident accounts are as follows;

• a valid passport,

• proof being PIO and NRI status,

• address of a foreign country,

• Indian address,

• Colured Photograph, and

• Indian PAN card.

Q2. How to transfer the amount to your Foreign exchange non-resident account?

Ans: You can transfer money to your FCNR account by NRE account. You can also transfer money from your overseas account using a wire transfer process.

Q3. What are the drawbacks of opening an NRI account?

Ans: There are a few drawbacks to opening an NRI account. On depositing the amount in NRI’s account there is a risk of rate fluctuation. The rate of interest is flexible and fluctuation in value so there is always a risk of loss during recovery.