For managing foreign currency, Non-Resident Indians (NRIs) have a prudent financial instrument at their disposal: Foreign Currency Non-Resident (FCNR) deposits. FCNR are deposit accounts designed to assist NRIs in holding their overseas earnings in foreign currencies without converting them into Indian rupees, thereby protecting these funds from exchange rate risk.
Additionally, these accounts offer competitive rates, tax exemption benefits, and easy repatriation, making them an enticing investment option. If you already have an FCNR account or are looking to open one, it is crucial to understand how to leverage your FCNR deposits effectively. Here are the top ways to do so:
1) Hedge against currency fluctuations
One of the fundamental benefits of an FCNR account, a variant of an NRI account, is its potential to hedge against currency fluctuations. By maintaining your deposits in foreign currencies such as AUD, CAD, USD, GBP, EUR, and JPY, you can safeguard your funds from the volatility of the Indian rupee. This stability allows the value of your investment to remain intact, irrespective of the fluctuations in exchange rates.
2) Attractive FCNR interest rates
FCNR accounts provide competitive interest rates that can considerably enhance your returns. Unlike other fixed deposit schemes, the interest generated on FCNR is exempt from income tax, making it a lucrative option for NRIs. The FCNR interest rates differ depending on the tenure and currency, allowing you to select the most beneficial option that aligns with your goals.
For example, FCNR rates on USD deposits might differ from those on EUR or GBP deposits, providing you the flexibility to enhance your earnings depending on existing market conditions. This benefit ensures that your investment grows efficiently over time.
3) Repatriation of funds
One of the essential features of FCNR accounts is the complete repatriation of both interest and principal constituents. This means you can freely move your funds back to your country of residence without any restrictions, offering you seamless access to your funds when required. This feature of the FCNR deposits makes it a preferred option for NRIs who need high liquidity and easy access to their funds.
Whether it is for personal expenditures, investments, or other financial requirements abroad, the ability to repatriate funds effortlessly allows your financial planning to stay responsive and flexible according to your changing scenarios.
4) Diversification of portfolio
FCNR deposits offer an opportunity to diversify your investment portfolio. By investing in various currencies, you can disseminate your risk and potentially benefit from the differing interest rates and economic conditions of distinct countries.
This diversification can assist in optimising your overall returns and mitigating the impact of adverse economic events in any single country. In simple terms, if one currency experiences a downturn, other currencies might perform well, balancing your investment portfolio’s performance.
5) Ease of account management
Managing an FCNR account is convenient and straightforward. Online banking services offered by most financial institutions make it possible for you to monitor and manage your deposits from anywhere in the world. Moreover, many financial institutions offer the option to automatically renew your deposits on maturity, ensuring your investments continue to grow without any interruptions.
Note that by opening an FCNR account with IndusInd Bank, you can rest assured about user-friendly interfaces and dedicated customer support. Other crucial features offered by the IndusInd Bank FCNR Deposit Account are:
| Feature | |
| Currencies allowed | AUD, CAD, USD, EUR, GBP, and JPY |
| Repatriability | Funds are fully and freely repatriable (both interest and principal) |
| Compounding tenure | Minimum of one year to up to five years |
| Interest rates | To earn interest, deposits must be kept for a minimum of one year |
Ending note
FCNR deposits offer NRIs a secure way to manage foreign earnings without converting them into Indian rupees, shielding against exchange rate fluctuations. These accounts offer competitive rates, easy repatriation, and tax exemption benefits, making them an excellent investment option.
Additionally, FCNR accounts allow diversification across distinct currencies and provide convenient account management features, ensuring efficient growth of your investments. If you have not opened an FCNR account yet, consider doing so today for these compelling reasons.