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Joint account, repatriation of balances.
Terms and conditions as applicable to NRE accounts in respect of joint accounts, repatriation of funds, opening account during temporary visit, operation by power of attorney, loans/ overdrafts against security of funds held in accounts, shall apply mutatis mutandis to FCNR (B) accounts.
Reserve Bank has now allowed AD Category-I banks and authorized banks to permit remittance of the maturity proceeds of FRNR (B) deposits to third parties outside India, provided the transaction is specifically authorized by the account holder and the authorized dealer is satisfied about the bona fides of the transaction.
The transactions in these accounts shall be reported to Reserve Bank in accordance with the directions issued by it from time to time.
Other features
  1. Reserve Bank will not provide exchange rate guarantee to authorized dealers for deposits of any maturity in these accounts.
  2. Lending of resources mobilized by authorized dealers under these accounts are not subject to any interest rate stipulations.
Tax Exemption
Income from interest on balances standing to the credit of FCNR (B) accounts is exempt from income-tax. Likewise balances held in such accounts are exempt from wealth tax.
Discretion of pay additional interest not exceeding one per cent on deposit of bank's staff.
In respect of deposit accepted in the name of-
  1. a member or a retired member of the bank's staff, either singly or jointly with any other member or members of his/her family, or
  2. the spouse of a deceased member or a deceased retired member of the bank's staff, the bank may, at its discretion, allow additional interest at a rate not exceeding one per cent per annum over and above the rate of interest stipulated by the bank subject to the following conditions:
    1. The depositor or all depositors of a joint account is/are non-resident/s of Indian nationality or origin, and;
    2. The bank shall obtain a declaration from the depositor concerned that the moneys so deposited or which may, from time to time, be deposited, shall be moneys belonging to the depositor as stated in clause (i) and (ii) above.
  3. The rate fixed by the bank deposits of staff members, existing or retired, should not exceed the ceiling rate prescribed by RBI. Explanation : 'Family' means and includes the spouse of the member/ retired member of the bank's staff, his/her children, parents, brothers and sisters who are dependent on such a member/ retired member but shall not include a legally separated spouse.
Premature withdrawal of deposits
  1. Banks on request from the depositor should permit premature withdrawal of deposits under the FCNR (B) Scheme. Banks are free to levy penalty for such premature withdrawal at their discretion. Banks may also, at their discretion, levy penalty to recover the swap cost in the case of premature withdrawal of FCNR (B) deposits. Where premature withdrawal of FCNR (B) deposits take place before completion of the minimum stipulated period of one year, in which case no interest is payable, banks may at their discretion levy penalty to cover the swap cost. However, the components of penalty should be clearly brought to the notice of the depositors at the time of acceptance of the deposits. 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.
  2. Conversion of FRNR (B) deposits into NRE deposits or vice-versa before maturity should be subject to the penal provision relating to premature withdrawal.
Payment of interest on overdue FCNR (B) deposits
Banks may at their discretion, renew an overdue deposit or a portion thereof provided the overdue period from the date of maturity till the date of renewal (both days inclusive) does not exceed 14 days. The rate of interest payable on the amount of the deposit so renewed should be appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositors seeks renewal, whichever is lower. In the case of overdue deposits where the overdue period exceeds 14 days and if the depositors places the entire amount of overdue deposit or a portion thereof as a fresh FCNR (B) deposit, banks may fix their own interest rates for the overdue period on the amount so placed as a fresh term deposit. Banks will have the freedom to recover the interest so paid for the overdue period if the deposit is withdrawn before completion of the minimum stipulated period under the scheme, after renewal.
Advances against FCNR (B) deposits – Manner of charging interest
  1. When a loan or an advance is granted against an FCNR (B) term deposit which stands in the name of a borrower either singly or jointly, a bank would be free to charge a rate of interest without reference to its own Base Rate.
  2. If the term deposit against which an advance was granted is withdrawn before completion of the prescribed minimum maturity period, such an advance should not be treated as advance against term deposit and interest should be charged as prescribed in terms of Reserve Bank of India's directive on interest rate on advances issued from time to time.
  3. When a loan or advance is granted out of resources mobilized under the scheme, interest rate chargeable should be at the rate as prescribed in terms of Reserve Bank of India's directive relating to Interest Rates on Advances.
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