Opening of Account in the name of individuals / entities of Bangladesh / Pakistan nationality / ownership requires RBI approval.

Types of Accounts

Accounts can be only in the form of Term Deposits (TD). The maturity periods being:

1. One year and above but less than two years;
2. Two years and above but less than three years; or
3. Three years only.

Opening of Account

Accounts can be opened:

1. with funds remitted from outside India;
2. with funds received in rupees by debit to the account of a non-resident bank;
3. by transfer of funds from existing FCNR / NRE Account.

Deposits may be made in designated currencies viz.,

• US Dollar
• Pound Sterling;
• Deutsche Mark;
• Japanese Yen;
• Euro; or
• Any other currency as may be designated by RBI.

Remittances received in Indian Rupees for opening these accounts shall be converted into the designated foreign currencies at the prevailing T.T. Selling Rate.

Permitted Credits

The following are the credits allowed into the Account:

1. Proceeds of remittances to India in any permitted currency;
2. Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency. The traveller's cheques / drafts should be in the name of the account holder or endorsed in his favour;
3. Proceeds of foreign currency notes / bank notes tendered by account holder and the same is declared on a Currency Declaration Form (CDF);
4. Transfer from FCNR / NRE Accounts;
5. Interest accruing on the funds held in the account;
6. Interest on Government securities and dividend on units of mutual funds. The securities / units should be purchased out of funds in FCNR / NRE Account or out of inward remittance of foreign exchange;
7. Maturity / Sale proceeds of the following:

1. Government securities; or
2. Units of Mutual Funds.

1. Refund of subscription monies made to new issues of shares or debentures of Indian Companies. Subscription should have been made out of funds in FCNR / NRE Account or out of inward remittance of foreign exchange;
2. Refund of application / earnest money made by house-building agencies on account of non-allotment of flat / plot. Interest payable by the agency can also be credited if tax has been deducted at source. Application / Earnest money should have been paid out of funds in FCNR / NRE Account or out of inward remittance of foreign exchange; and
3. Any other credit if covered under general or special permission granted by Reserve Bank of India (RBI).

Permitted Debits

1. Local disbursements;
2. Remittances outside India;
3. Transfer to FCNR / NRE Account of the account holder or of any other person eligible to maintain such account;
4. Investment in shares / securities / commercial paper of an Indian Company or for purchase of immovable property in India. The RBI should have permitted the investment / purchase; and
5. Any other debit if covered under general or special permission granted by Reserve Bank of India (RBI).

For the purpose of payment in rupees, funds held in these accounts shall be converted into Indian Rupees at the prevailing T.T. Buying Rate.

Movement of funds will be free of inland exchange or commission.

Rate of Interest

The rates of interest offered by various Banks in India differ.

It is beneficial to ascertain the best of the rates offered by various banks before investing with any particular Bank.

Click Here for Interest Rates offered by various Banks and an analysis of the same.

Loans against balances held in the account

1. Loans are granted to the account holder for:

1. Personal purposes or for carrying on business activities.

Loans cannot be used for:

1. re-lending;
2. carrying on agricultural / plantation activities; or
3. investment in real estate business.

2. Making direct investment on non-repatriation basis by contribution to Capital in Indian Firms / Companies.
3. For acquisition of flat / house in India for the account holder's residential purpose.

2. Loans are also granted to third parties resident in India:

Conditions to be fulfilled:

1. There should be no direct or indirect foreign exchange consideration for the non-resident depositor;
2. Loan should be utilised for personal purposes or for carrying on business activities.

1. re-lending;
2. carrying on agricultural / plantation activities; or
3. investment in real estate business.

3. The account holder for taking loans outside India can also show these deposits as security.

Change of Residential status

On immigrating to India:

1. FCNR (B) Accounts can be re-designated as resident accounts; or
2. Funds held in FCNR (B) Accounts may be transferred on maturity to RFC Account.

Deposits shall continue till maturity at the contracted rate of interest.

Repatriation of funds to non-resident nominee

Nomination can be in favour of residents or non-residents.

Funds lying in the NRE Account on the death of an account holder can be repatriated to his non-resident nominee.

For remittance of funds by resident nominee outside India for meeting the liabilities of the deceased account holder or for similar other purposes, RBI approval is required.

Joint Accounts

Two or more non-resident individuals can open Joint Account, provided they are Persons of Indian Nationality or Origin.

However, Opening of these accounts by a non-resident jointly with a resident is not permissible.

Operations by Power of Attorney (POA) Holder

POA Holder can make withdrawals from the account only for local payments. The POA Holder is permitted to operate the Account to make investments on behalf of the account holder.

However, the POA Holder is not allowed:

1. to repatriate funds held in the account outside India;
2. to make payment by way of gift to a resident on behalf of the account holder; or
3. to transfer funds from the account to another FCNR Account.

Temporary Overdrawings

Banks allow temporary overdrawings on the NRE Savings Bank Accounts. The overdrawings have to be repaid within two weeks out of:

1. inward remittances; or
2. by transfer of funds from other FCNR / NRE Account.

Tax Liability

Income from interest on FCNR Deposit Account is exempt from Income Tax. Deposit amount in such accounts is exempt from Wealth Tax.

Premature withdrawal of the Deposit

Premature withdrawal of FCNR Deposits for the purpose of opening of NRNR Rupee Deposit Account with an authorised dealer other than the one with whom the FCNR Deposit Account is maintained will attract penalty.

For any information regarding the Foreign Currency (Non -Resident) Account (Bank) Scheme (FCNR-B A/c), please visit the FAQ section