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Foreign Currency CDs for NRI in Indian Banks


siddharth18
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I know there are a lot of Indians on this board (including NRIs). I'm wondering if anyone has had experience with FCNR (FOREIGN CURRENCY NON-RESIDENT) deposits. It's basically CDs offered by banks in India for NRIs, under the auspices of RBI (Reserve Bank of India - http://rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8120).

 

Normally it would be an easy pass if:

 

(i) it offered same or nearly the same APY as US-based, FDIC insured banks, or

(ii) it was only offered by private banks with no accountability/oversight/creditworthiness.

 

but, in this case:

(i) The APYs are over double what the current saving banks offer in USA

(ii) It is offered by state-controlled banks such as SBI, Bank of Baroda, Syndicate Bank.

 

Take a look at the APY for 5-year CDs, denominated in USD: http://www.syndicatebank.in/scripts/FCNR.aspx

 

So I have two questions:

1. How should I be thinking about the risk in this case, especially since it's being offered by a state-owned/controlled bank? It's equivalent to buying an Indian government bond denominated in foreign currency (USD)?

 

2. Has anyone had experience with FCNR? What should I look out for?

 

I should mention that after maturity, the CD is fully and free repatriable back to the foreign country without any tax obligation arising in India.

 

 

More links:

http://www.rbi.org.in/scripts/FAQView.aspx?Id=98

http://www.rbi.org.in/scripts/FAQView.aspx?Id=69

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I don't have any recent information on fcnr deposits but you have to look into a couple of things to do if you do decide to open CDs

 

1. File an FBAR with treasury dept every year if you have more than 10k

 

2. Indian banks don't give out 1099-Int at the year end. US banks doing business in India do it like Citibank

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