Foreign Currency Non-Resident (Bank)) Account {FCNR(B)}

Why in News?

The Reserve Bank of India (RBI) has reopened a special FCNR(B) swap window for banks to attract foreign currency deposits from Non-Resident Indians (NRIs), reviving a mechanism last used during the 2013 rupee crisis. The facility will be available for deposits mobilised up to 30 September 2026, with the swap window remaining open until 16 October 2026.

About FCNR(B) Deposit

• FCNR(B) (Foreign Currency Non-Resident (Bank)) Account is a fixed deposit account that allows NRIs to maintain deposits in designated foreign currencies.
• It is available only to NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs).
• Deposits can be maintained in freely convertible currencies such as:
  • US Dollar (USD)
  • Pound Sterling (GBP)
  • Euro (EUR)
  • Japanese Yen (JPY)
  • Australian Dollar (AUD)
  • Canadian Dollar (CAD)
• The deposit tenure ranges from 3 to 5 years.
• Both principal and interest are repaid in the same foreign currency, eliminating exchange-rate risk for the depositor.
• Interest earned and deposits are tax-free in India.

RBI’s Special FCNR(B) Swap Window

• Under the scheme, authorised dealer banks can mobilise fresh FCNR(B) deposits and swap the foreign currency proceeds with the RBI.
• The measure aims to:
  • Increase foreign currency inflows.
  • Strengthen India’s external sector position.
  • Support the rupee amid currency volatility.
  • Enhance foreign exchange reserves.

Key Features of FCNR(B) Accounts

• Denominated and maintained in foreign currency throughout the deposit period.
• No exposure to rupee depreciation or appreciation.
• Fully repatriable principal and interest.
• Suitable for NRIs residing in countries where bank deposit rates are relatively low.
• Operates as a term deposit account with a fixed maturity period.

FCNR(B) vs NRE vs NRO Accounts

Feature	FCNR(B) Account	NRE Account	NRO Account
Currency of Deposit	Foreign Currency	Indian Rupees	Indian Rupees
Exchange Rate Risk	No	Yes	Yes
Source of Funds	Foreign Income	Foreign Income	Income earned in India and abroad
Repatriability	Fully Repatriable	Fully Repatriable	Limited Repatriability
Tax on Interest in India	Exempt	Exempt	Taxable
Account Type	Fixed Deposit	Savings/Current/FD	Savings/Current/FD

Significance

• The move is expected to attract greater NRI deposits and strengthen foreign exchange inflows.
• It helps reduce pressure on the rupee during periods of global uncertainty and elevated crude oil prices.
• The measure reflects RBI’s proactive approach to maintaining external sector stability and adequate foreign exchange reserves.

Sources: IE & Mint