7 Benefits Offered By An FCNR Account

by Giselle Lobo Writer & Blogger

Banks encourage individuals to open a savings account to maintain security and help earn interest on the deposit. They can also keep their funds and other valuables safe from the public eye and start saving for the future. Since money becomes the need of the hour during emergencies, they can use their own for paying for medical expenses without relying on borrowers. They can also remain free of debts and repayments.

According to experts, an FCNR account plays a significant role in attracting remittances from NRIs. It is a unique financial instrument that can serve as term deposit accounts only. Individuals residing overseas can open the account by submitting copies of passport and visa of the account proposer in addition to bank accounts held overseas, proof of foreign residence and income documents, among others.

The FCNR rates of interest vary depending upon the type of currency and the bank. For example, the FCNR deposit for one year in USD may be around 2.5 per cent to 3 per cent, but the same for AUD is 5 per cent. There are some factors to consider before opening this account, such as family members, source, currency, tax, and repatriation. Account applicants must keep them in mind if they fail to operate the account and need a beneficiary.

Here are seven benefits of opening this account:

Protection against forex rate risks: The foreign currency account remains secured against foreign exchange rate risks as the savings get deposited in foreign currency. The principal and the interest get transferred in the currency of the account without any loss of exchange.

Interest earnings: The interest earned on FCNR deposits are exempt from income tax in India.

Joint account: There can be two or more NRIs as joint account holders. However, a joint account with another person resident in India is not permitted.

Currencies: The currencies eligible for deposit in this account are Pound Sterling, US Dollar, Yen and Euro.

Repatriation: In foreign currency accounts, both the principal and interest amounts are freely repatriable. In other words, the deposit amount and the interest earned are repatriable to the depositor’s country of residence without any restrictions.

Tenure: Banks offer these accounts to NRIs for not less than a year and not more than three years. All the authorised banks set the interest rates within limits set by the RBI.
Payment of interest: The FCNR deposit rates of interest are payable after the end of the first year. The interest gets compounded subsequently on a half-yearly basis.