Trying to understand FCNR (B)? Everything you need to know in 5 minutes.

This guide is provided for informational purposes only. It is not intended to be, and should not be relied upon as, financial, investment, tax, legal, or accounting advice. Financial products, tax rules, regulations, and eligibility requirements can vary based on your country of residence, citizenship, and individual circumstances, and may change over time. Always consult a qualified financial adviser, tax professional, or attorney before making financial decisions.

If you are an NRI, you are very familiar with bank deposits. You lock in an amount with your bank for a fixed period and get paid interest. But unlike domestic investors, you have choices with your investment funds. Do you open a bank deposit in your country of residence with a low rate of interest? Or convert it into rupees to chase higher INR deposit rates? How about a "best of both worlds" option?

FCNR (B) is a fixed deposit in a foreign currency offered by Indian banks to NRIs and OCI holders. Common currencies include USD, GBP, EUR, CAD, AUD, SGD, and more. The deposit is typically a term deposit, usually available for maturities from one year to five years.

FCNR (B) deposits often have very attractive interest rates, especially compared to rates offered by your local bank in your country of residence. Here is the main point: you are not converting the money into INR for a FCNR (B) deposit — your principal and interest are both denominated in the foreign currency. The full amount on maturity will be paid by the bank in the same foreign currency.

An NRE deposit is an INR deposit funded from overseas income. The principal and interest are generally freely repatriable, and the interest is usually exempt from Indian income tax while you remain an eligible non-resident.

An NRO deposit is also an INR deposit, but it is typically used for income earned in India, such as rent, dividends, pension, or local proceeds. NRO interest is taxable in India, and repatriation is subject to documentation and limits.

An FCNR (B) deposit, by contrast, is a foreign-currency deposit. Its biggest advantage is that it avoids INR currency risk if your future need is also in that foreign currency.

• For FCNR (B) deposits: if you place a USD 100,000 deposit, you get the principal and interest in USD back.
• For NRE fixed deposits: you convert USD 100,000 into INR and place that in an NRE fixed deposit. On maturity, you get the principal and interest back in INR.

FCNR (B) deposits have several genuine advantages.

• Interest rates are more favourable for FCNR (B) for any foreign currency than at a local bank.
• Returns are predictable. A USD FCNR (B) deposit at 6% gives you a known USD maturity value. You do not have to guess where the USD/INR conversion rate will be in one, three, or five years.
• FCNR (B) deposits are fully repatriable and generally exempt from Indian income tax for eligible non-residents. However, that does not mean it is tax-free globally.

FCNR (B) is simple, but not frictionless.

• Tax treatment: FCNR (B) returns may be taxed in your country of residence. For example, a US tax resident generally has to report FCNR (B) interest on their US tax return. Foreign account reporting rules, such as FBAR and FATCA-related reporting, may also apply.
• Be aware of currency conversions: FCNR (B) is foreign-currency denominated, but doing unnecessary conversions may eat into your returns. For example, converting INR from your NRE account into foreign currency to place a FCNR (B) deposit will reduce your returns. Always know how your bank will accept your foreign currency — you will make the deposit usually via a SWIFT wire transfer (which has fees).
• Indian bank deposits are not risk-free: If your Indian bank fails, you may lose your FCNR (B) deposit.
• Premature withdrawals: May have penalties or may reduce your interest rate. Try not to break FCNR (B) deposits ahead of the committed duration.

FCNR (B) is most useful when your future needs are foreign currency based. Avoiding currency risk, you stand to make a good guaranteed return. It may be less compelling if your future expenses are in INR — if you ultimately need rupees, then an NRE deposit may be a better choice. In that case, FCNR (B) protects you from rupee depreciation, but you may eventually have to convert it into INR anyway.

Here is an example of how currency risk may change your returns. Assume an NRI has USD 100,000 and is comparing two options for one year.

Option A: USD FCNR (B) deposit

• Deposit amount: USD 100,000
• FCNR (B) interest rate: 6.0%
• Maturity value after one year: USD 106,000

There is no INR conversion in this option. You started with dollars and ended with dollars.

Option B: Convert to INR and place an NRE fixed deposit

• Deposit amount: USD 100,000
• Exchange rate at time of deposit: ₹83 per USD
• Amount converted: ₹83,00,000
• NRE FD interest rate: 7.5%
• Maturity value after one year: ₹89,22,500

At first glance, the NRE FD looks better because 7.5% is higher than 6.0%. But the final result depends on the exchange rate when you convert back to dollars.

• If USD/INR stays at ₹83 after one year, your ₹89,22,500 becomes about USD 107,500. In that case, the NRE deposit beats the FCNR (B) deposit.
• If USD/INR depreciates to ₹86 after one year, your ₹89,22,500 becomes about USD 103,750. In that case, the FCNR (B) deposit wins.

The INR currency depreciation is a real return killer. INR depreciated by 7% in the first half of 2026. By staying invested in foreign currency, FCNR (B) removes the currency risk.

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