‘No Proposal To Prematurely End FCNR(B) Scheme’, Pg13

Key Highlights:

• Reserve Bank of India (RBI) Governor Sanjay Malhotra confirmed there is no proposal to prematurely discontinue the Foreign Currency Non-Resident (Bank) (FCNR(B)) deposit scheme.
• Indian banks are currently receiving robust inflows under the FCNR(B) scheme.
• The scheme is actively contributing to fortifying India's external position by attracting foreign currency.

Detailed Insights:

• The FCNR(B) scheme is a fixed-term deposit facility that allows Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) to hold deposits in Indian banks in specified foreign currencies.
• A key feature of these deposits is that both the principal and interest are denominated in foreign currency, safeguarding depositors from the depreciation of the Indian Rupee.
• Interest earned on FCNR(B) deposits is exempt from income tax in India for eligible non-residents, and the funds, including interest, are fully repatriable.
• The RBI had reintroduced a concessional swap facility in 2026 to further encourage foreign currency inflows and enhance domestic liquidity.
• The primary objectives of the FCNR(B) scheme include mobilizing foreign currency from overseas Indians, providing a stable source of foreign funding for Indian banks, and strengthening India's foreign exchange reserves.

Key Concepts Involved:

• Foreign Currency Non-Resident (Bank) (FCNR(B)) Scheme: A deposit scheme allowing overseas Indians to hold fixed deposits in foreign currencies with Indian banks, mitigating exchange rate risk.
• Non-Resident Indian (NRI): An Indian citizen residing outside India for employment, business, or any other purpose indicating an uncertain stay.
• External Position: A country's overall financial standing with the rest of the world, reflecting its foreign assets and liabilities.
• Foreign Exchange Reserves: Assets held by a central bank in foreign currencies, crucial for managing balance of payments and influencing monetary policy.