Definition of the
term “Deposit”
Deposits received by
the bank for a fixed period.
Foreign Currency (Non-resident) Accounts
(Banks) Scheme
FCNR (B) Scheme came into force from May 15, 1993. The scheme is governed by FEMA directives
since 2000. An Authorised Dealer Bank shall pay interest on deposits accepted or
renewed by it under the scheme as per terms and conditions specified below:
Maturity of deposit
(a)
One year and above but less than two years
(b)
Two years and above but less than three years
(c)
Three years and above but less than four
years
(d)
Four years and above but less than five years
(e)
Five years only
Note: Recurring
Deposits should not be accepted under the FCNR (B) Scheme.
Interest Rates on Deposits accepted under
FCNR (B) Scheme
The board of directors will approve the rate of interest within the
ceiling prescribed by RBI. Alternately BOD may authorise the Asset Liability
Management Committee to fix the interest rates and report it to the Board
immediately thereafter.
The interest rates ceiling on FCNR (B)
deposits are as under:
Duration
|
1 year to less than 3 years
|
3 – 5 years
|
With effect from March 1, 2014 till date
|
LIBOR/ Swap plus 200 basis points
|
LIBOR/ Swap plus 300 basis points
|
Notes:
a) On floating rate deposits,
interest shall be paid within the ceiling of Swap rates for the respective
currency/ maturity plus 200 basis points/ 300 basis points as the case may be
and in case of fixed rate deposits interest shall be paid as above.
b) For floating rate deposits, the
interest reset period shall be six months.
c) The
interest rate will be fixed on the basis of the LIBOR/SWAP rates as on the last
working day of the preceding month.
Benchmark Rates
Since February 2006, FEDAI has been quoting
the LIBOR / Swap rates for arriving at the interest rates on NRI deposits.
Manner of payment of interest
i) The interest should be paid considering
360 days in a year.
ii) The interest will be calculated and paid
at intervals of 180 days and thereafter for the remaining number of days.
However, the depositor may opt to receive the interest on maturity with
compounding effect.
Rounding
of the interest on deposits
The interest rates should
be rounded off to the nearest two decimal points.
Payment
of interest on term deposit maturing on Saturday/Sunday/ holiday/non-business
working day
Banks
should pay interest at the contracted rate on the principal deposit for the
holiday period if it happens to fall on the date of maturity, upon payment of
the proceeds on the succeeding working day.
In case
of reinvestment deposits, banks should pay interest for the intervening holiday
on the maturity value.
Payment of interest
on overdue FCNR (B) deposits
Banks may renew an
overdue deposit if it is received within 14 days of maturity. The applicable rate
of interest should be the prevailing rate as on the date of maturity or on the
date when the depositor seeks renewal, whichever is lower.
Where the overdue
period exceeds 14 days, banks may fix their own rates for the overdue period.
Banks may however recover the interest so paid if the deposit is withdrawn
before completion of the minimum stipulated period under the Scheme.
Interest payable on
the deposit of a deceased depositor
In
the case of a term deposit standing in the name/s of -
i)
a deceased individual depositor, or
ii)
two or more joint depositors, where one of
the depositors has died, interest should be paid in the manner indicated below
:
(a) at
the contracted rate on the maturity of the deposit;
(b) in case of payment before maturity, interest
should be paid at the rate applicable to the period for which the deposit
remained with the bank, without charging penalty;
(c) Where the depositor expires before the
date of maturity and the deposit is claimed after maturity, interest till
maturity will be paid as per contract and thereafter simple interest at the
rate prevailing at the time of maturity for the actual period that the deposit
remained with the bank.
Where the death
happens after the date of maturity, interest beyond maturity will be paid at the
rate payable to savings deposits held under Resident Foreign Currency (RFC)
Account Scheme;
(d) At the request of claimants, bank may
agree to split the term deposit into two or more receipts. This will not be
construed as premature withdrawal provided the period and aggregate amount of
the deposit do not undergo any change.
Note: Where
the claimants are residents, the maturity proceeds may be converted into Indian
rupees on the date of maturity and interest thereafter shall be paid at the
rate applicable to domestic deposit scheme.
Payment of interest
on FCNR (B) deposits of NRIs on return to India
Banks may allow FCNR
(B) deposits of returning NRIs to continue at the contracted rate till maturity. Such deposits should be treated as resident
deposits from the date of return of the account holder to India. Premature
withdrawal of such FCNR (B) deposits should be subject to penal provisions of
the Scheme. Upon maturity, these accounts should be converted into Resident
Rupee Deposit Account or RFC Account (if eligible) at the option of the account
holder. The rate of interest on the new deposit should be that which is applicable
to such deposit account.
Prohibition on payment of additional interest not
exceeding one per cent on deposits of bank’s staff
With effect from July
18, 2012, no additional interest will be paid on FCNR (B) deposit accounts of Banks’
own staff members.
Prohibition
on payment of additional interest on deposits of Senior Citizens
Banks are prohibited
from paying additional interest on non-resident deposits of senior citizens
including FCNR (B) deposits.
Premature withdrawal of deposits
(i) Banks
shall permit premature withdrawal of deposits under the Scheme and levy penalty
at their discretion. Banks may also levy penalty to recover the swap cost.
Where premature withdrawal is before the minimum stipulated period of one year,
no interest shall be paid and the bank may levy penalty to cover the swap cost.
If the depositors are not informed of the penalty provisions at the time of
acceptance of deposits, the exchange loss arising out of premature withdrawal
will have to be borne by the banks.
(ii) Conversion
of FCNR (B) deposits into NRE deposits or vice-versa before maturity should be
subject to the penal provision relating to premature withdrawal.
Advances against FCNR
(B) deposits - Manner of charging interest
Rupee advance against
FCNR (B) deposits
Bank would be free to charge a rate
of interest without reference to its own Base Rate on advances granted against
an FCNR (B) term deposit.
Rupee advances against FCNR (B) deposit to a third party
or out of the resources mobilised under the scheme
When a loan is granted against the
deposit to a third party or out of resources mobilised under the Scheme,
interest should be at the rate prescribed in terms of RBI’s directive relating
to Interest Rates on Advances.
Advances
granted in foreign currency out of the resources of FCNR (B) deposits
Banks have
the freedom to determine the interest rates on Loans in foreign currency out of
eligible resources of FCNR (B) deposits.
Addition
or deletion of name/s of joint account holders
A bank if
satisfied by the reasons, may allow the addition/ deletion of names of joint
account holders or allow an individual to add the name of another person as a
joint holder. However, the amount or duration of the original deposit should
not undergo a change. FCNR
(B) accounts, jointly with a resident or with a Pakistani/Bangladeshi
nationals of Indian origin, will
be subject to the instructions issued by Foreign Exchange Department, Reserve
Bank of India from time to time.
Conversion
of FCNR (B) Accounts of Returning Indians into RFC Account - Waiver of penalty
The penal provisions
would not be applicable in the case of premature conversion of balances held in
FCNR (B) deposits into RFC Accounts by Non-Resident Indians on their return to
India.
Conversion of FCNR (B) Accounts of Returning Indians into
RFC Accounts/Resident Rupee Accounts-
Payment of interest
A bank should pay
interest, at the time of conversion of FCNR(B) Account into RFC/Resident Rupee
Account even if it has not run for a minimum maturity period, subject to the
condition that the rate of interest should not exceed the rate payable on
savings bank deposits held under RFC Account Scheme.
Prohibitions
No bank should:
(i) accept
or renew a deposit over five years.
(ii) discriminate in the matter of rate of
interest paid on the deposits accepted on the same date and for the same
maturity, except on the size group basis which will be subject to the following
conditions:
a)
Banks should decide the currency-wise minimum
quantum on which differential rates of interest may be offered.
b)
The differential rates should be subject to
the overall ceiling prescribed.
c)
Interest rates paid by the bank should not
subject to negotiation.
(iii) pay
brokerage/commission/incentives on deposits mobilized under FCNR(B).
(iv) employ/
engage anybody for collection of deposit or for selling any other deposit
linked products on payment of remuneration in any form or manner.
(v) accept
interest-free deposit or pay compensation indirectly.
Compliance
with Foreign Exchange Management (Deposit) Regulations, 2000
Banks
should adhere to the directions contained in Schedule 2 of the Foreign Exchange
Management (Deposit) Regulations, 2000 as amended from time to time.
Based
on RBI master circular dated 1/7/15.Refer www.rbi.org.in
for any clarification if needed…. Poppy
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