Currently, the job scenario has become very unpredictable and scary for Indians based overseas. The situation has become one of the toughest for NRIs to cope with, especially after the financial meltdown of 2009. Also, with crises enveloping the fixed-income and international equity markets, what is the secure investment alternative before NRIs? Let us find out the same.
The situation is not entirely hopeless for the NRIs as they can derive a lot out of interest rate arbitrage. The fact that they are drawing salary in a foreign currency and are well positioned to deposit the same in Indian banks devoid of any currency risk works to their advantage.
The Blessing Of FCNR Deposits
Let us see how they can benefit from the deposits in detail. Indian banks give the privilege of FCNR or FCNR(B), i.e. Foreign Currency Non-Resident (Bank), deposits, solely to NRIs. These deposits can be utilized to the optimum by the NRI but merely a few high net-worth individuals (HNIs) are using it to their advantage. According to fresh data from the RBI, NRIs keep close to $14 billion of FCNR deposits in Indian banks.
An NRI based, for instance, in the UK is parking his entire income in the bank of his newly adopted country where the interest rate is very low. Rather than putting the entire income in the local bank, an NRI should deposit some part in Indian banks, where the interest rate is very attractive. This way NRIs can reap a lot of advantages as FCNR deposits in India give good returns compared to local deposits in their newly-adopted country. Also, an NRI can transfer entirely the interest as well as the principal to his present country of residence.
It is also to be noted that FCNR deposits are provided in all major foreign currencies and carry, at least, a tenure of 12 months. The interest accrued on them is not taxed in India, but the deposits might attract cess in the current country of residence.
Hence, if you happen to be an NRI with an NRE (non-resident external) account, then you should ideally request your bank to create an FCNR deposit. In these uncertain times, these deposits can be very handy for you.
(With Inputs From Agencies)