What Is an FCNR Deposit?

The Foreign Currency Non-Resident (Bank) deposit, commonly known as FCNR(B) or simply FCNR, is a term deposit that NRIs and PIOs can maintain in a foreign currency with Indian banks. Permitted currencies include USD, GBP, EUR, AUD, CAD, JPY, SGD, HKD, and a few others. The defining feature of FCNR is that both principal and interest remain denominated in the chosen foreign currency, eliminating the risk of rupee depreciation that affects INR-based NRE deposits.

FCNR is governed by RBI's Master Direction on Deposits and Accounts, which permits tenures from 1 year to 5 years. Interest is calculated on a reducing-balance basis, typically compounded semi-annually in global markets. Key attractions for NRIs are tax-exemption in India, full repatriability, and currency matching for those who plan to spend the funds abroad.

Eligibility and Permitted Currencies

Only NRIs (Non-Resident Indians) and PIOs (Persons of Indian Origin) can open FCNR accounts. Residents who become NRI must redesignate existing resident deposits. Accepted currencies vary by bank but typically include USD, GBP, EUR, AUD, CAD, JPY, SGD, and HKD. Some banks also offer CHF and NZD FCNR. Minimum deposit is typically USD 1,000 or equivalent. There is no maximum cap, making FCNR suitable for large NRI portfolios.

FCNR Interest Rates (FY 2025-26)

FCNR rates are linked to global benchmarks. For USD, the benchmark is SOFR (Secured Overnight Financing Rate). RBI regulates the maximum rate banks can offer: currently benchmark plus 250 basis points for 1-3 year tenures, and benchmark plus 350 basis points for 3-5 year tenures. Approximate rates at present:

USD FCNR: 1-year 5.5 to 6 percent, 3-year 4.75 to 5.5 percent, 5-year 4.5 to 5 percent.

GBP FCNR: Similar range to USD given SONIA benchmark comparability.

EUR FCNR: 1-year 3 to 3.75 percent, 3-year 2.75 to 3.5 percent.

AUD FCNR: 1-year 4.25 to 5 percent, 3-year 4 to 4.75 percent.

Tax Treatment in India and Abroad

Interest on FCNR deposits is exempt from Indian income tax under Section 10(4)(ii) of the Income Tax Act, provided the depositor qualifies as NRI or PIO at the time of deposit and continues to be so during the tenure. There is no TDS deducted. However, the interest is typically taxable in the depositor's country of residence. US residents must report FCNR interest on Form 1040. UK residents report on their self-assessment return. UAE and Singapore residents face no tax at home. The DTAA between India and these countries may provide tax credit for tax paid in India (which is zero for FCNR, so the credit is nil, but reporting is still required).

Using the FCNR Deposit Calculator

Enter the deposit currency, principal amount, annual interest rate, and tenure. The calculator returns maturity value, total interest earned, and a year-by-year growth table. Use it to compare USD vs GBP rates, to decide between 3-year and 5-year tenures, and to project future dollar flows for retirement or educational planning.

FCNR vs NRE vs NRO: Which Is Best?

FCNR: Foreign currency principal, tax-free in India, fully repatriable, no forex risk. Best for NRIs who will spend the money in the same foreign currency or who want to eliminate currency risk.

NRE FD: INR principal, higher interest rates (typically 6.5 to 7.5 percent), tax-free in India, fully repatriable. Best for NRIs confident about rupee stability or planning to use funds in India.

NRO FD: INR principal, same rates as domestic FDs, interest taxable in India with 30 percent TDS, limited repatriability (USD 1 million per financial year). Suitable for Indian-source income (rent, dividend) that needs to be parked in India.

Premature Closure and Penalty Rules

Premature withdrawal of FCNR deposits is allowed but attracts penalty. If withdrawn before 1 year, no interest is paid. Between 1 year and full tenure, interest is calculated at the rate applicable for the period actually completed, minus 1 percent penalty. For example, a 5-year USD FCNR at 5.5 percent withdrawn after 3 years earns the 3-year rate (say 5 percent) minus 1 percent = 4 percent. Plan tenure carefully to match your currency needs.

Loan Against FCNR

Most Indian banks allow loans against FCNR deposits up to 90 percent of deposit value. The loan can be in INR or foreign currency. Interest on the loan is typically 1 to 2 percent above the FCNR rate. This is a tax-efficient way to meet temporary liquidity needs without breaking the deposit and losing the compounding benefit.

Common FCNR Mistakes

Currency mismatch: Booking USD FCNR when you plan to retire in India creates unnecessary currency risk. Match the deposit currency to your future spending currency.

Returning to India during tenure: If you return to India and become resident, you must redesignate FCNR accounts. Failure to do so can attract FEMA penalties. Inform the bank within 90 days of return.

Ignoring home country tax: While interest is tax-free in India, it may be fully taxable at home. Factor in post-tax returns when comparing FCNR with local bank deposits in your country of residence.