By Manu Rao | Updated March 2026
What Is an FCNR Account?
An FCNR (Foreign Currency Non-Resident) account is a term deposit (fixed deposit) maintained by NRIs and OCI cardholders in a foreign currency at an Indian bank. Unlike NRE and NRO accounts which hold Indian rupees, FCNR accounts hold funds in currencies like USD, GBP, EUR, JPY, CAD, or AUD.
The account is technically called FCNR(B) — the "B" stands for "Banks," distinguishing it from the discontinued FCNR(A) scheme. In common usage, people just say FCNR.
Legal Basis
- FEMA Notification No. FEMA 5(R)/2016-RB — Foreign Exchange Management (Deposit) Regulations, 2016
- Schedule 2 of FEMA 5(R) — Specific provisions for FCNR(B) deposits
- RBI Master Direction — Deposits by NRIs (FED Master Direction No. 3/2015-16)
- RBI/2023-24/46 — Interest rate ceilings for FCNR(B) deposits (updated periodically)
Key Features
| Feature | Detail |
|---|---|
| Currency | USD, GBP, EUR, JPY, CAD, AUD (6 permitted currencies) |
| Account type | Only fixed deposits (no savings or current account) |
| Who can open | NRIs and OCI cardholders |
| Minimum tenure | 1 year |
| Maximum tenure | 5 years (some banks accept up to 7 years for specific tenors) |
| Minimum deposit | Varies by bank — typically $1,000 or equivalent |
| Source of funds | Foreign remittances, transfer from NRE account, maturity of another FCNR deposit |
| Joint account | With other NRIs/OCIs only (not with a resident Indian) |
| Repatriability | Fully repatriable — principal + interest, no limits |
| Tax in India | Interest exempt from Indian income tax under Section 10(4)(ii) and Section 10(15)(iv)(fa) |
| Exchange rate risk | None — deposit and withdrawal are in the same foreign currency |
Interest Rates on FCNR Deposits
RBI sets interest rate ceilings for FCNR deposits. Banks cannot offer rates above these ceilings. As of March 2026:
- USD deposits (1-3 years): Overnight ARR (SOFR) plus 250 basis points (ceiling)
- USD deposits (3-5 years): Overnight ARR (SOFR) plus 350 basis points (ceiling)
- GBP, EUR, JPY, CAD, AUD: Similar formulas based on respective benchmark rates
In practice, FCNR interest rates are lower than NRE fixed deposit rates because the bank bears no exchange rate risk on FCNR. Typical rates for USD deposits range from 4.5% to 5.5% depending on the tenor and bank.
Why FCNR Exists — The Exchange Rate Advantage
The primary reason NRIs choose FCNR over NRE is exchange rate protection. Here is a concrete example:
In January 2023, the USD/INR rate was approximately Rs 81.5. An NRI deposits $10,000 into an NRE account — it becomes Rs 8,15,000. By January 2025, suppose the rate moves to Rs 84. When the NRI withdraws and converts back to USD, the Rs 8,15,000 becomes approximately $9,702. The NRI has lost $298 in exchange rate depreciation, partially or fully eating into the interest earned.
With an FCNR deposit, the NRI deposits $10,000 and gets back $10,000 plus interest in USD at maturity. The rupee's movement does not matter.
However, if the rupee appreciates (strengthens), the NRE account would have been better. FCNR locks out both downside and upside currency movements.
FCNR for Business Investment
FCNR funds can be used for investment in Indian companies on a repatriation basis, similar to NRE:
- Transfer from FCNR to the Indian company's AD bank account (the bank converts to INR at the prevailing rate)
- The investment is treated as FDI
- Subject to FDI sectoral caps and route (automatic or government)
- FC-GPR filing within 30 days of share allotment
The practical difference from NRE is that with FCNR, the NRI knows exactly how many dollars they are deploying (since the FCNR is in dollars), whereas NRE involves converting at the rate on the day of transfer.
FCNR vs NRE vs NRO — When to Use Which
| Use Case | Best Account | Why |
|---|---|---|
| Parking foreign savings, no exchange rate risk | FCNR | Held in foreign currency, no INR conversion |
| Regular remittances to India for expenses | NRE Savings | Easy debit access, no tax on interest |
| Receiving rental income from Indian property | NRO | Only NRO accepts Indian-source income |
| Investment on repatriation basis | NRE or FCNR | Both qualify; FCNR avoids exchange risk until investment |
| Investment on non-repatriation basis | NRO | NRO investments are domestic, no FDI cap |
| Maximum interest earnings | NRE FD | Typically higher rate than FCNR, tax-free in India |
What Happens at Maturity
At maturity, the FCNR deposit proceeds can be:
- Renewed as another FCNR deposit (same or different tenor)
- Credited to the NRE account (converted to INR at prevailing rate)
- Remitted abroad to the NRI's foreign bank account
- Used for investment in India
Premature withdrawal is permitted but may attract a penalty (reduced interest rate). The minimum holding period is 1 year — withdrawal before 1 year means no interest is paid at all.
What Happens When an NRI Returns to India
When the NRI becomes a FEMA resident (returns to India permanently):
- FCNR deposits can continue until maturity at existing rates
- At maturity, proceeds can be credited to an RFC (Resident Foreign Currency) account — allowing the returning NRI to hold foreign currency even as a resident
- Alternatively, proceeds can be converted to INR and credited to a regular resident account
- No new FCNR deposits can be opened after becoming a resident
Common Mistakes
- Expecting savings account functionality. FCNR is a fixed deposit only. There is no FCNR savings account or FCNR current account. If you need transaction capability, use NRE savings.
- Depositing a currency not on the permitted list. Only USD, GBP, EUR, JPY, CAD, and AUD are allowed. If you earn in SGD or AED, you must convert to a permitted currency before depositing. Some NRIs lose money on the double conversion (AED to USD, then USD to FCNR).
- Withdrawing before 1 year. No interest is paid for withdrawals within 12 months. If you might need the money sooner, an NRE account with flexible access is better.
- Ignoring home country taxation. FCNR interest is exempt from Indian tax. But it may be taxable in your country of residence. US NRIs, for example, must report FCNR interest as foreign income on their IRS returns.
- Not comparing rates across banks. FCNR rates vary within the RBI ceiling. SBI, HDFC, ICICI, and foreign banks like HSBC and Citibank offer different rates for the same tenor. A 0.25% difference on a $100,000 deposit over 3 years is $750.
Practical Example
Deepak, an Indian-origin doctor in the US (OCI cardholder), has $200,000 in savings that he wants to park safely for 3 years. He plans to eventually invest some of it in an Indian healthcare startup.
If Deepak puts $200,000 in an NRE FD at 6.5% for 3 years, he earns approximately Rs 4.2 lakh per year in interest (tax-free). But if the rupee weakens from Rs 83 to Rs 88 over 3 years, his dollar value drops by about 6%.
Instead, Deepak opens a 3-year FCNR(B) deposit in USD at ICICI Bank at 5.1%. He earns $10,200 per year in interest. At maturity, he gets $230,600. No exchange rate surprise. Interest is tax-free in India (he reports it on his US return).
When Deepak decides to invest $100,000 in the healthcare startup, he breaks part of the FCNR deposit (accepting a 0.5% interest rate penalty for premature withdrawal), transfers to the startup's AD bank account, and the bank converts to INR. The investment is FDI on a repatriation basis. FC-GPR is filed.
Key Takeaways
- FCNR accounts hold foreign currency (USD, GBP, EUR, JPY, CAD, AUD) as term deposits only
- No exchange rate risk — deposit and withdrawal in the same currency
- Interest is tax-exempt in India under Section 10(4)(ii)
- Fully repatriable — no $1 million cap like NRO
- Minimum 1 year tenure; premature withdrawal before 1 year = zero interest
Want help choosing between FCNR, NRE, and NRO for your Indian investment? Beacon Filing advises NRIs on the right account structure.