Foreign Currency Non-Repatriable (FCNR) Deposit
A Foreign Currency Non-Repatriable (FCNR) deposit is a term deposit maintained by Non-Resident Indians (NRIs) or Persons of Indian Origin (PIOs) with Indian banks in a foreign currency, where both the principal and interest can be repatriated abroad without restriction.
Despite the word 'non-repatriable' in the name — which reflects historical terminology — FCNR(B) deposits (the 'B' stands for 'banks', distinguishing the current scheme from an earlier FCNR(A) scheme discontinued in 1993) are, in practice, fully repatriable. Both the principal and the accrued interest can be freely transferred outside India when the deposit matures. The deposits are maintained in major foreign currencies accepted by the banks, including US dollars, British pounds sterling, euros, Japanese yen, Canadian dollars, and Australian dollars.
FCNR(B) deposits are opened only as term deposits — they are not available as savings or current accounts — with a minimum tenor of one year and a maximum tenor of five years. Interest rates on FCNR(B) deposits are regulated by the RBI, which periodically sets ceilings on the spread over LIBOR (now SOFR for USD deposits) that banks can offer. The interest earned is not subject to Indian income tax for as long as the account holder maintains NRI status.
From a macro perspective, FCNR(B) deposits have been used as a policy tool by the RBI during periods of rupee stress. Most notably, in 2013 during the 'taper tantrum' — when global capital fled emerging markets after the US Federal Reserve signalled tapering of quantitative easing — the RBI launched a special FCNR(B) mobilisation scheme in September 2013 offering concessional swap rates to banks that attracted fresh FCNR(B) deposits. This scheme raised approximately $34 billion within months, significantly relieving pressure on the rupee and India's foreign exchange reserves.
For NRI depositors, FCNR(B) deposits offer complete elimination of currency risk on the invested amount, since the deposit is held in the foreign currency of their choice. They do not benefit if the rupee appreciates, but they are also protected if it depreciates. This contrasts with NRE (Non-Resident External) rupee deposits, which are also fully repatriable but are denominated in rupees, exposing the NRI to exchange rate risk on the invested principal.
Banks compete actively for FCNR(B) deposits given that the funds represent stable, foreign-currency-denominated liabilities. Large private sector banks such as HDFC Bank, ICICI Bank, and State Bank of India have historically been the largest mobilisers of FCNR(B) deposits from the Indian diaspora.