- State-owned Canara Bank has launched a new FCNR(B) Special Deposit Scheme aimed at Non-Resident Indians (NRIs), offering attractive interest rates, tax benefits and flexible tenure options.
- Under the scheme, NRIs can earn up to 6.50% per annum on US dollar (USD) deposits, making it one of the attractive foreign currency deposit options currently available in India.
- The move comes shortly after the Reserve Bank of India (RBI) announced measures to encourage foreign currency inflows and strengthen the country’s external sector.
What is the FCNR(B) Special Deposit Scheme?
The Foreign Currency Non-Resident (Bank) [FCNR(B)] Special Deposit Scheme allows NRIs to maintain fixed deposits in designated foreign currencies while earning interest in the same currency.
The key features of the scheme include:
- Interest rate up to 6.50% per annum on USD deposits.
- Deposit tenure ranging from 3 years to 5 years.
- Lock-in period of one year.
- Protection against exchange rate fluctuations as deposits are maintained in foreign currency.
The scheme is designed to provide NRIs with a secure and tax-efficient investment avenue while enabling India to attract foreign currency deposits.
Foreign Currencies Covered
Canara Bank is offering the FCNR(B) Special Deposit Scheme in the following currencies:
- US Dollar (USD)
- British Pound Sterling (GBP)
- Euro (EUR)
- Canadian Dollar (CAD)
- Australian Dollar (AUD)
This gives customers flexibility to invest in the currency of their choice while earning competitive returns.
Tax Benefits for NRIs
- One of the biggest attractions of the FCNR(B) scheme is its tax treatment.
- Interest earned on FCNR(B) deposits is exempt from tax in India.
- Depositors can enjoy tax-efficient returns while maintaining their savings in foreign currency.
- This makes FCNR(B) deposits particularly attractive for NRIs seeking stable returns with tax advantages.
Loan Facility Against Deposits
Canara Bank has also introduced a loan facility against FCNR(B) deposits.
This means depositors can:
- Avail loans without prematurely breaking their deposits.
- Continue earning interest on their investments.
- Access liquidity when required.
The facility provides additional flexibility for customers managing financial needs while living abroad.
Why Has Canara Bank Introduced This Scheme?
The launch comes in the backdrop of recent RBI measures aimed at:
- Encouraging foreign currency inflows.
- Strengthening India’s foreign exchange reserves.
- Supporting capital inflows.
- Enhancing liquidity in foreign currencies.
Banks are increasingly offering attractive rates on NRI deposits to attract overseas savings and improve foreign currency availability.
What is FCNR(B)?
FCNR(B) stands for: Foreign Currency Non-Resident (Bank) Account
It is a term deposit account that allows NRIs to:
- Hold deposits in foreign currencies.
- Earn interest in the same currency.
- Avoid exchange rate risk on principal and interest.
- Repatriate funds freely.
Since both the principal and interest are maintained in foreign currency, customers are protected from fluctuations in the Indian rupee.
Benefits of FCNR(B) Deposits
Protection Against Currency Risk
Deposits are maintained in foreign currency, reducing exposure to exchange rate volatility.
Attractive Interest Rates
The scheme currently offers:
- Up to 6.50% p.a. on USD deposits
Tax-Free Interest
Interest earned is exempt from tax in India.
Full Repatriation
NRIs can repatriate both:
- Principal amount
- Interest earned
without restrictions, subject to applicable regulations.
Loan Against Deposit
Customers can access funds through loans without liquidating their investments.
Conclusion
- Canara Bank’s FCNR(B) Special Deposit Scheme provides NRIs with an opportunity to earn competitive returns on foreign currency deposits while enjoying tax benefits and protection from exchange rate risks.
- The scheme also aligns with the RBI’s broader objective of attracting foreign currency inflows and strengthening India’s external sector.
- With interest rates of up to 6.50%, multiple currency options and loan facilities, the new FCNR(B) deposit scheme could emerge as an attractive savings avenue for NRIs seeking secure and flexible investments in India.