For many Non-Resident Indians (NRIs), the attraction of the highest interest rates is a natural consideration when managing their earnings abroad. But the returns alone should not be the reason. According to experts, the currency you earn today and the currency you’ll spend in the future can have a big impact on the value of your savings. The right deposit is often a matter of balancing returns against currency certainty. It is here that a Foreign Currency Non-Resident (FCNR) deposit can come in handy.ย
Unlike other deposit accounts, it allows NRIs/OCIs (Overseas Citizens of India) to save in foreign currency rather than Indian rupees. Regardless of whether the rupee depreciates or not, the value of your deposit in the foreign currency does not get affected. It is also known to generate fixed and certain returns.
An FCNR deposit is an option for NRIs to make fixed deposits in foreign currencies like US dollars, British pounds, euros, Australian dollars, Canadian dollars and Japanese yen.
“For instance, if you make a deposit of USD 100,000, the deposit will remain in US dollars until the tenure of the deposit. Interest will be generated in dollars, and the maturity value of the deposit will also be repaid in dollars. These deposits can be held for a period of one to five years,” explains Gaurav Matta, Co-founder, NRISimplify.ย
When might FCNR not be the right choice?
According to Gaurav Matta, FCNR deposits aren’t ideal for everyone. If you’re likely to need the money within a year, they may not be suitable, as premature withdrawals can result in lower or no interest depending on the bank’s terms.
“Similarly, if your future expenses, such as buying a home, funding a wedding or paying for education, are in India, you’ll eventually have to convert the money into rupees. The amount you receive will depend on the exchange rate at that time,” he said.ย
Those looking for higher long-term growth may also want to explore other investment options, as FCNR deposits are designed for capital preservation rather than wealth creation.
The recent interest rate window
As an interim measure announced by the Reserve Bank of India (RBI) in June 2026, banks will offer higher interest rates on some FCNR deposits from 17 June to 30 September 2026. For the stated period, interest rates on US dollar deposits ranged from 5.5 per cent to 7.1 per cent, depending on the bank, which was higher than the earlier standard interest rates of 2 per cent to 4 per cent.
Tax Treatment
Interest earned on FCNR deposits is generally exempt from tax in India, subject to applicable conditions. However, taxation in the country of residence may still apply.
“For example, an NRI living in the US may have to pay tax on the interest earned under US tax laws, while someone living in the UAE could potentially retain the full interest, depending on the applicable regulations. The final tax outcome depends on the rules in both India and the country where you are a tax resident,” Matta said.ย
FCNR Vs NRE
If your income and future expenses are both in a foreign currency, an FCNR deposit can make more sense because it avoids unnecessary currency conversion. But if your future expenses will be in India and you eventually need Rupees, an NRE (Non-Resident External) fixed deposit may be a better fit.ย Also, TDS is calculated differently while buying property from an NRI.ย
According to Matta, investors should ask some simple questions while deciding to deposit savings. These are:ย
- What currency do I earn in?ย
- What currency will I need later?ย
- When will I need the money?ย
- Where do I pay taxes?ย
- Am I looking for safety or growth?ย
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