Foreign Currency Non-Resident Accounts - FCNR

Under FCNR(B) Scheme, the exchange risk is borne by the respective Banks which maintain the accounts.

The accounts are maintained in designated foreign currencies and the account holder is not exposed to any exchange risk.

DESIGNATED BRANCHES

Only branches which are designated by Central Office to maintain FCNR (B) deposits should handle such deposits. Other branches are not permitted to maintain FCNR (B) deposits. Such restriction is made to ensure prompt reporting system and efficient management of funds. The list of authorized branches is displayed in the TREASURY (FOREIGN) intranet site.

ELIGIBILITY

Individuals of Indian nationality or origin (NRIs) as defined under NRE Accounts Scheme are eligible to open deposit accounts under the captioned scheme.

DESIGNATED CURRENCIES

 Deposits can be opened only in the following designated currencies viz., US Dollar, Pound Sterling, EURO, Japanese Yen, Canadian Dollar, Swiss Franc, New Zealand Dollar, Australian Dollar and Singapore Dollar.

TYPE OF ACCOUNT, PERIOD AND RATE OF INTEREST

1. Accounts are permitted to be opened only in the form of term deposits. Our Bank permits opening of term deposits as RDP only for the following maturities:

• (a)One year and above but less than two years.
• (b)Two years and above but less than three years.
• (c)Three years and above but less than four years.
• (d)Four years and above but less than five years.
• (e)Five years only.

2. Our Treasury Department, Central Office advises the interest rates and it must be updated every month on the first working day irrespective of whether any operation is there or not for all currencies in FCNRB.

2.1. The interest on the deposits accepted under the scheme should be paid on the basis of 360 days to a year ( for GBP it is 365 days )

6.2.2. The interest on FCNR(B) deposits should be calculated and paid at intervals of 180 days each and thereafter for the remaining actual number of days. However, the depositor will have the option to receive the interest on maturity with compounding effect.

JOINT ACCOUNT:

The account may be held singly or jointly only in the names of eligible persons.

OPENING OF ACCOUNTS:

 1. FCNR(B) should be opened only after sighting the credit in our Nostro account. The eligible person should submit application in the form prescribed (Annexure - I) for opening FCNR(B) - RDP account, duly filled in and signed, supported by required documents.

 2. The account may be opened in the name of the eligible person by fresh remittance from abroad through normal banking channel or by transfer from their NRE/FCNR account.

 3. The account may be opened by Non-Residents during their visits to India with foreign currency travelers’ cheques in his/her own name or foreign currency notes. While doing so, branches should be satisfied that he/she is still a Non-Resident Indian. Branches should call for Currency Declaration Form (CDF) - wherever applicable - for endorsement and keep a photocopy of the same on record.

 4. Remittances from abroad for opening/crediting to FCNR (B) accounts would ordinarily be made only in the designated currency in which the account is desired to be opened/maintained. If, however, remittance is received in a currency other than the designated currency (including funds received in rupees by debit to the account of a non-resident bank) it will be converted into the designated currency at the prevailing rate by the branch at the risk and cost of the remitter and the account opened/maintained in the designated currency.

MINIMUM AMOUNT FOR DEPOSITS

 Branches should accept deposits with minimum size stipulations as advised by Treasury (Foreign), Central Office from time to time.

As a rule, branches should pass account opening entries only after receipt of funds in our Nostro Account. Hence opening of FCNR(B) deposit by purchasing relevant instrument by debit to DBP(F) is prohibited.

RENEWAL OF DEPOSITS

 If the depositor has given automatic renewal instruction, the matured deposit could be renewed on maturity without reference to the account holder.

  In the absence of automatic renewal instruction, if the deposit is not renewed on the date of maturity and renewed subsequently, then overdue interest for the broken period will be paid at the RFC — SB rate (simple) prevailing on the date of maturity.

PREMATURE CLOSURE

 Reserve Bank has stipulated that while Banks should permit premature withdrawal of deposits under the scheme, they are free to levy penalty for such premature withdrawal at their discretion. Banks may also, at their discretion, levy penalty to recover the swap cost in the case of premature withdrawal of FCNR (B) deposits. The components of penalty should be clearly brought to the notice of the depositors at the time of acceptance of deposits and if it is not done, the exchange loss arising out of premature withdrawal will have to be borne by the Banks.

Our Banks’ present guidelines on premature closure of FCNR(B) deposit are as under

• (a)No interest is payable if the deposit is closed before one year. Interest is paid at the eligible rate for the period the deposit has run minus a penalty of 1% on premature closure of the deposit for payment. Interest is paid at the eligible rate for the period the deposit has run without any penalty, if such closure is for renewal.
• (b) If an overdue deposit renewed after paying the interest for the overdue period is closed before completing the minimum period for which such deposits are accepted, no interest is paid on the deposit and the interest paid for the overdue period has to be recovered.
• (c) Conversion of FCNR(B)deposits into NRE deposits or vice-versa before maturity should be subject to the penal provision relating to premature withdrawal.

PAYMENT OF DEPOSITS

1.Maturity proceeds of FCNR (B) accounts or premature withdrawal thereof for the purpose of meeting local disbursements in India should be converted into rupees at TT buying rate for the relative currency ruling on the date of withdrawal and should be routed through the account of the depositor. Branches should exercise utmost caution and care when they receive instruction for closure (on maturity or foreclosure) and repatriation by Fax or e-mail. They should verify its authenticity and seek confirmation from the depositor before acting upon such messages.

2. Branches may renew an overdue deposit, or a portion thereof provided the overdue period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days.

2.1. The rate of interest payable on the amount of the deposit so renewed should be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal, whichever is lower.

2.2. In the case of overdue deposits where the overdue period exceeds 14 days and if the depositor places the entire amount of overdue deposit or a portion thereof as a fresh FCNR(B)deposit, banks are permitted to fix their own interest rates for the overdue period on the amount so placed as a fresh term deposit. In our bank, we are presently paying interest for broken period as applicable to RFC SB deposits.

Any inland movement of funds for the purpose of operating FCNR (B) accounts as well as for repatriation abroad for balances held in FCNR (B) accounts would be free of inland exchange or commission, for non-resident depositors.

WHEN THE DEPOSITOR BECOMES RESIDENT

When the NRI returns to India for permanent settlement, the following options are available to him regarding treatment of FCNR(B) deposit with unexpired maturity:

• (a)Retain the FCNR(B) deposit as per the original terms till maturity, i.e., the original contracted rate of interest on FCNR(B) deposit will be paid till maturity for the contracted period. On maturity, convert the FCNR(B) deposit as RFC Deposit (if eligible) or as a Rupee deposit at TT buying rate prevailing on the date of conversion.
• (b)If the depositor requests for premature closure of FCNR(B) deposit and conversion to RFC deposit, penal provisions shall not be applicable. However, if the depositor requests for premature closure and conversion to rupee deposit, penal provisions shall apply.

NOMINATIONS

 1. Nomination facility is available to FCNR(B) depositors as in any other deposit accounts.

2. Resident nominees may be allowed funds (From out of their share of proceeds of Non-Resident Indian’s deposits) towards liquidation of liabilities of the deceased NRI depositor at the overseas centre, before settling the claim.

INTEREST PAYABLE ON FCNR(B) DEPOSIT OF A DECEASED DEPOSITOR/S

 Branches should note the following guidelines while settling claims in the case of a deposit standing in the name/s of —

(i)a deceased individual depositor, or

(ii)two or more joint depositors, where one of the depositors had died. Interest on such FCNR(B) deposit/s of the deceased depositor, shall be paid as indicated below:

• I. At the contracted rate on maturity of the deposit.
• II. In the event of the heir/s, legal representative/s or nominee/s claiming the payment of the deposit before maturity date, branches will pay interest at the rate as applicable for the period for which the deposit has run (as prevailing at the time of opening of the deposit in question) without levying any penal interest.
• III. In the event of death of the depositor before the date of maturity of the deposit and the amount is claimed after the date of maturity, the bank should pay interest at the contracted rate till the date of maturity. From the date of maturity to the date of payment, the bank should pay simple interest at the applicable rate operative on the date of maturity, for the period for which the deposit remained with the bank beyond the date of maturity.
• IV. If the depositor dies after the date of maturity of the deposit, the bank should pay interest at a rate operative on the date of maturity in respect of savings deposits held under RFC account scheme, from the date of maturity till date of payment, appropriate to the currency of the deposit, irrespective of the fact whether the heir/s, legal representative/s or nominee/s seek renewal of the deposit/s or seek repatriation of the amount, subject to the condition that they are eligible to receive the claim in foreign currency.
• V. If the heirs, legal representatives, or nominees seek splitting of the deposit and issuance of two or more receipts individually in the name of heir/s, legal representative/s or nominee/s, such splitting shall not be construed as premature closure and no penalty will be levied provided the period and the aggregate amount of the deposit do not undergo any change.
• VI. If the legal heir/s are residents, then the maturity proceeds may be converted into Indian rupees on the date of maturity and for the subsequent period the interest shall be payable at a rate applicable to the deposit of similar maturity under the domestic deposit scheme.

LOANS AND OVERDRAFTS

1. TO THE DEPOSITOR

Branch may extend loans and advances to the depositor against his deposit for purposes other than prohibited investments subject to compliance of prescribed margin norms and rate of interest as per Central Office circulars in force.

1.1. Branches may grant loans against FCNR(B) deposits either to the depositors or to the third parties as under:

Rupee loans* in India

Loans against NRE/FCNR(B) fixed deposits: Rupee loans allowed to depositor/third party without any ceiling subject to usual margin requirements **

Foreign currency loans * outside India

Loans against NRE/FCNR(B) fixed deposits: Foreign Currency loans allowed by branches outside India (our overseas branches/correspondents) to or in favour of non-resident depositor/third party at the request of depositor for bonafide purpose against security of funds held in NRE account in India without any ceiling subject to usual margin requirements** and agree for remittance of the funds from India, if necessary for liquidation f the outstanding.

In case of FCNR(B) deposits, the margin requirements shall be notionally calculated on the rupee equivalent of the deposits in accordance with para 9(2) of Schedule 2 of Foreign Exchange Management (Deposit)Regulations,2000.

1.2. Further, the facility of premature withdrawal of NRE/FCNR deposits shall not be available where loans against such deposits are to be availed of. This requirement may specifically be brought to the notice of the deposit holder at the time of sanction of the loan. The existing loans which are not in conformity with the above instructions shall continue for their existing term and shall not be rolled over/renewed. Other conditions as regards to granting of loan against NRE/FCNR deposits shall remain unchanged.

1.3. The loan proceeds are to be credited to NRO Account and not to depositor’s NRE Account.

2. The loan can be repaid either by fresh remittance from abroad or out of maturity proceeds of the deposit. The loan can be repaid out of funds held in his/her NRO account.

TO THIRD PARTIES

 Branch may propose to their Regional Office for loans to third parties who are residents in India against FCNR (B) deposits, subject to following conditions:

• (a)There should not be any direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his/her deposit, to enable the resident individual/firm/company to obtain the facility.
• (b)The period of loan should not exceed the unexpired period of maturity of the deposit accepted as security. The non-resident depositor should furnish an irrevocable undertaking to the branch not to withdraw the deposit during the pendency of loan/overdraft.
• (c)The loan should be utilized for personal purposes or for carrying on business activity other than prohibited purposes.
• (d)Branches should satisfy themselves as to the acceptability of purpose, genuineness of the credit needs of the borrower and end use of funds. They should not be guided solely by the availability of security.
• (e)Branches should comply with prescribed margin norms and rate of interest as per Central Office circulars in force.

Branches should be guided by Documentation procedure for loans against NRE deposits set out in this Chapter while granting loans against FCNR(B) deposits.

Margin on loan against FCNR deposits

 1. The margin on advances in rupees against FCNR deposits in USD is fixed at 10% plus 5% for every year of unexpired period of the deposit.

1.2. For reckoning the unexpired period to maturity, the period less than six months can be ignored but if the unexpired period is more than 6 months, then it should be treated as a year.

2. In case of rupee advances against FCNR deposits of other currencies, the margin will be 25 %.

FORWARD COVER TO NON-RESIDENT INDIANS

Branches are now permitted to book forward cover for their Non-Resident Indian customers against their FCNR(B) and NRE deposits. Branches should refer to detailed guidelines furnished in the Chapter No. 7 titled ‘Forward contracts’ of this volume of Book of Instructions.

CRYSTALISATION OF OVERDUE FOREIGN CURRENCYDEPOSITS. (Treasury Permanent Fx Circular No. FX/85/2014-2015 Dated 11.11.2014 and FX/18/2017-18 dated 10.10.2017)

1. When the term deposits in FCNR/RFC portfolio are matured and overdue and not closed or renewed even after lapse of three years from the date of maturity, branches should maintain a separate dairy of such accounts and should convert those foreign currency deposits into Indian Rupees, immediately on completion of the threshold period of three years at the exchange rate prevailing as on the date of conversion.

2. RFC(SB)/EEFC(CA)/FCA(CA)/DDA(CA): if the accounts remain inoperative for a period three years (debit of bank charges if any not to be reckoned as operation), branches must serve a three month notice to the depositor at his/her last known address. Thereafter branches must convert the balance from the foreign currency in which it is denominated to Indian Rupees at the end of the notice period at the prevailing exchange rate.

3. If the depositor claims the deposit amount, it can be paid in Indian rupees or in foreign currency equivalent (calculated at the rate prevalent as on the date of payment/claim) of the Indian rupee proceeds of the original deposit and interest if any.

4. A report of the overdue FCNR deposits should be generated by the Branches from CBS Report menu daily – Report menu: - Dep-FCNRA Overdue deposits—More than three years.

Based on the list of overdue deposits extracted through the report menu, branches must crystallize the deposits by reporting in FETREM through CFEPC for obtaining TT buying rate from dealing room and convert the foreign currency amount into Indian Rupees. This converted amount is to be credited and kept in SUNDRY CREDITORS—Overdue Foreign Currency Deposit Account: 00000 113301024 using the same Deposit Closure menu in CBS.

Statement

 As per extant guidelines, branches should do the updation about the country codes and transaction codes. The Foreign Exchange Department, Central Office, would send the statement NRD-CSR for the bank to Reserve Bank of India, Mumbai.

Branches should be guided by instructions contained Master Circular on FCNR B and amendments thereto by AP (DIR) circulars issued by Reserve Bank of India from time to time.