All You Need to Know About NRI Fixed Deposits
When you’ve saved up enough money in your savings account, you can use the opportunity to earn higher interest rates on it, as opposed to the basic 3% or 4% interest you earn on your savings – you can open a fixed deposit. The term ‘fixed’ implies that your deposit can be maintained for a specific period or term, which is why FDs are also known as term deposits. These deposits can be opened by both, Resident Indians and well as Non Resident Indians. If you are an NRI looking to open an NRI fixed deposit, this article is for you.
·        Types of FDs
You can create three types of fixed deposits as an NRI – Non-Resident External Rupee or NRE FD, Non-Resident Ordinary Rupee or NRO FD and Foreign Currency Non- Repatriable or FCNR FD. While the first two FDs are created in INR, the third type of FD may be created in foreign currencies (as is apparent from the term). Creating the foreign currency deposit is just as safe as creating NRE or NRO deposit, since you don’t have to worry about currency fluctuation on maturity.
·        Currencies of Deposits
While the NRO fixed deposit is a Rupee deposit, NRIs can create FDs in several major international currencies. These include the US Dollar, Great Britain Pound Sterling, European Euro, Japanese Yen, Australian Dollar, New Zealand Dollar, Singapore Dollar and Hong Kong Dollar. Other accepted currencies for NRI deposits include the Swedish Krona, Danish Krone and Swiss Francs.
·        Investment term
Typically, FDs for NRIs can be created for a period of 7 days at minimum, whereas the maximum deposit term is 10 years. Note that the 7 days to 10 years term is applicable only on NRO and NRE Fixed deposits. In case of foreign currency deposits, the minimum and maximum investment term is 12 months and 5 years respectively.
·        Interest rates
The interest you can earn on your NRI deposit depends upon the type of deposit you own. Since you would be depositing foreign currencies in your FCNR and NRE account FD, the interest rates are different as they are set on the basis of LIBOR/SWAP rates. In case of NRO deposits, most banks offer the same interest rates as those offered to resident Indian FD holders, since the NRO account is essentially a rupee account.
·        Joint holding
All NRI deposits can be held jointly with another individual. However, the individual you assign as a joint holder can differ based on the type of FD you’ve opened. For instance, in case of NRE or foreign currency FD, the joint holder should be another NRI. On the other hand, in case of NRO fixed deposits, the joint holder should be a resident Indian.
·        Premature withdrawal
Although FDs are meant to last through the deposit term; many banks also allow you to withdraw your NRI deposits, before the term ends. You can withdraw your deposit in a financial emergency. However, you have to pay a small penalty for premature withdrawals – typically 1% of the interest earned on the FD. Also, the premature withdrawal penalty is waived off, after a specific period of holding the FD.
NRI FDs are a great way to park away your savings, if you prefer conservative and safe means of investments. Creating FDs, especially FCNR FDs can help you benefit from currency rate fluctuations, when the FD matures. Once the FD has matured, the new exchange rate would be applicable, and if it is higher than when you invested, you can turn a huge profit by reinvesting.
