Rise in NRI Deposits in India

During the fiscal year 2022-2023 (April 2022 to March 2023), the NRI bank accounts held in the country by non-resident Indians (NRIs) received a total of $7.99 billion, which is more than double the amount of $3.23 billion received in the previous fiscal year (FY22). Based on data from the RBI, the outstanding amounts in NRI deposits increased from $135.54 billion in February 2023 to $137.88 billion by the end of March 2023. However, there was a decrease in outstanding NRI deposits from $139.02 billion at the end of March 2022 to $137.88 billion in March 2023. Let us understand the rise in NRI deposits in India in this blog.

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Reason for Rise in NRI Deposits in India

According to the bankers: 

• The increase in inflows can be attributed to measures such as relaxed restrictions on interest rates. 
• In July, the RBI implemented measures aimed at boosting inflows into NRI accounts. These measures included the relaxation of interest rate caps on Foreign Currency Non-Resident (Bank) or FCNR (B) and Non-Resident External (NRE) deposits.
• Additionally, incremental deposits made until November 4, 2022 were exempted from the requirement of maintaining the cash reserve ratio (CRR) and statutory liquidity ratio (SLR).

Further Analysis 

• There was an increase in the FCNR (B) deposits from $18.4 billion in February 2023 to $19.34 billion in March 2023. They were also higher as compared to $16.91 billion in March 2022. 
• NRE deposits stood at $95.44 billion this March, whereas the NRO deposits were almost flat at $23.09 billion in March 2023. 

What are NRI Fixed Deposits?

NRI Fixed Deposits are highly desirable among NRI investors in India, serving as a prominent avenue for NRI investments in India. NRI Fixed Deposits can be opted through three distinct types of NRI Accounts, namely:

1. Non-Resident External (NRE) Account
2. Non-Resident Ordinary (NRO) Account
3. Foreign Currency Non-Resident (Bank) [FCNR(B)] Account

Now, let’s explore these accounts briefly:

What is NRE Fixed Deposit?

The Non-Resident External (NRE) FD account serves as a platform for NRIs to deposit their foreign currency into an Indian account. The NRE account operates in Indian rupees and offers complete tax exemption. Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) have the opportunity to invest in NRE deposits by utilizing NRO and NRE accounts.

Features of NRE Fixed Deposits

NRE deposits encompass a range of features, several of which are outlined below:

• Deposits in an NRE FD account can only be made in Indian currency. 
• Opening an NRE FD account through internet banking is a hassle-free process. 
• The tenure of these fixed deposits ranges from 1 to 10 years. 
• The interest rates on NRE FDs can reach up to 8% per annum. 
• To calculate the returns from NRE FDs, one can utilize a fixed deposit calculator. 
• Auto-renewal facilities are provided by banks for NRE FDs, ensuring seamless continuation upon maturity. 
• Nomination facilities are available for NRE FDs, and certain banks allow joint investments in these accounts. 
• Premature withdrawal options are also provided, subject to the rules and regulations of the individual banks.
• The minimum and maximum deposit amounts vary based on the policies set by each bank.

Benefits of NRE Fixed Deposits:

Here are some benefits of NRE FD accounts:

• Foreign currency transferred in an NRE Fixed Deposit is converted into Indian Rupee (INR) at the time of deposit.
• NRE FD deposits enjoy complete tax exemption, both on the principal amount and the interest earned. 
• Both the principal and the interest from NRE FDs can be freely repatriated to the depositor’s country of residence.
• NRE FDs offer higher interest rates compared to regular savings accounts.
• Certain banks provide overdraft facilities up to 90% of the NRE term deposit amount, and depositors can also obtain loans against their fixed deposits.
• Some banks allow depositors to open NRE FD accounts jointly and also provide the option to nominate family members.

Which Bank offers the Highest Interest Rate on NRE FD?

You can explore the most up-to-date NRE FD and Savings Account Interest Rates to identify the bank that provides the highest interest rate that suits your preferences.

What is NRO Fixed Deposit?

An NRO deposit account, also known as a Non-Resident Ordinary account, is a deposit account maintained in Indian Rupees. NRIs utilize this account to effectively manage their income in India. It is permissible to hold this account jointly with any resident in India. Furthermore, it is important to note that an NRO FD account can only be opened in conjunction with an existing NRO Account.

Features of NRO Fixed Deposits

• The minimum tenure of NRO FD is 7 days whereas the maximum tenure for NRO FD is 10 years. 
• The interest rates for NRO FDs differ among banks, typically ranging from 2.5% to 7%. It’s important to note that the interest earned is subject to taxation in India.
• NRIs have the option to open an NRO account either individually or jointly with their resident relatives in India.
• Withdrawals from NRO FDs are permitted only in Indian currency. Some banks may allow premature withdrawals with associated penalties.
• NRO FDs can be opened by NRIs and PIOs.
• NRO FD accounts are denominated in Indian rupees. 
• While the principal amount cannot be freely transferred to foreign accounts, the interest earned can be transferred to external accounts after tax deduction. 

Benefits of NRO Fixed Deposits

Here are the benefits of investing in an NRO FD:

• NRIs can conveniently deposit recurring income, such as rental income or dividends generated within India, into an NRO account. This allows them to effectively manage their rupee expenses.
• Holding an NRO account makes it easier for NRIs to invest in bonds and mutual funds in India.
• NRIs can open an NRO account jointly with a resident family member. This enables the joint account holder to seamlessly manage Indian financial commitments on behalf of the NRI.
• NRO FDs offer competitive interest rates, and they may also provide preferential rates on remittances.
• If an NRI decides to liquidate assets or investments, they can deposit the funds in an NRO account. From there, they can transfer the money to their country of residence (up to USD 1 million per year). However, it’s important to note that the NRI is liable to pay income tax in India and may need to complete the repatriation formalities.

Which Bank offers the Most Competitive NRO FD Rates in India?

NRIs can compare the latest NRO fixed deposit rates offered by various banks, such as SBI NRO fixed deposit rates, ICICI NRO fixed deposit rates, HDFC NRO fixed deposit rates, and more, before finalizing an FD scheme.

What is FCNR Deposit?

FCNR (Foreign Currency Non-Resident) full form is Foreign Currency Non-Resident Account. The FCNR account serves as a fixed deposit account, offering Non-Resident Indians the opportunity to securely hold their foreign earnings within various banks in India.

Features and Benefits of FCNR Fixed Deposits

Here are the features of the FCNR fixed deposit account:

• An FCNR (Foreign Currency Non-Resident) account can be opened by an NRI and PIO.
• The FCNR account is exclusively denominated in foreign currencies, mitigating the risk of currency conversion fluctuations.
• The interest rate offered on the FCNR account functions similarly to other fixed deposit accounts and is regulated by the RBI (Reserve Bank of India), resulting in consistent rates across different banks.
• The FCNR account is a fixed deposit (term deposit) account rather than a savings account, with a minimum maturity period of 1 year and a maximum maturity period of 5 years.
• The FCNR account allows nomination, enabling the appointment of an NRI, PIO, or Indian resident as the nominee.
• The interest earned and the principal amount in the FCNR account are entirely tax-free. Additionally, both the principal and the interest earned can be freely repatriated to the country of residence.

Which is the Best Bank for FCNR FD for NRIs?

Following the removal of the interest rate cap on incremental FCNR and NRE deposits by the Reserve Bank of India, banks have increased FCNR deposit rates to as high as 4.52%. NRIs can check out the latest FCNR deposit rates offered by prominent Indian banks, such as SBI FCNR rates, ICICI FCNR rates, HDFC FCNR rates. 

Contact SBNRI 

Due to a lengthy process and lots of documents required to apply for NRI FD accounts, NRIs living away from India may face several challenges. At SBNRI, we understand this struggle. You can download SBNRI App to apply for an NRI Fixed Deposit account with nominal documentation with a smooth procedure.

You can also click on the button below for more information and to apply for an NRI FD account. Visit our blog and YouTube Channel for more details.

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