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Quick answer: an FCNR(B) deposit is held in a foreign currency, so the amount you get back is in that currency whatever the rupee does. An NRE fixed deposit is held in rupees, so the exchange rate when you convert back to your currency can raise or lower what you receive. Both are repatriable and both can carry tax free interest while you are a non resident, but they differ in currency risk, tenure, withdrawal rules and what happens when you return to India.
This is general information, not financial or tax advice. Interest rates are set by banks and change often, so this guide quotes none. Rules below come from RBI’s directions and FAQs, and tax points should be checked with a chartered accountant. This guide is independent and has not been reviewed by a financial adviser.
The two products side by side
| FCNR(B) fixed deposit | NRE fixed deposit | |
|---|---|---|
| Currency | A permitted foreign currency, meaning a freely convertible one that the bank offers | Indian rupees |
| Exchange rate risk | The deposit stays in foreign currency during the tenure, so you are not exposed to rupee movements on the deposit itself | You convert foreign currency to rupees and back, so the exchange rate when you convert back affects what you receive |
| Tenure | One year up to five years, in bands. Term deposits only | At least one year. The longest tenure is set by the bank |
| Interest | Paid every 180 days or at maturity with compounding, as RBI’s Direction describes | Cannot exceed the bank’s comparable domestic rupee fixed deposit rate |
| Repatriation | Repatriable | Repatriable |
See RBI’s Interest Rate on Deposits Directions and FAQ on accounts in India by non residents (landing page: RBI FAQs). Check the bank’s own list of currencies and the current rates before you decide. Do not choose on a rate table that is a few weeks old.
An example of the currency effect
These figures are assumptions and not market rates. Suppose an NRI puts USD 10,000 into an FCNR(B) deposit, and the same money converted at Rs 80 to the dollar (Rs 8,00,000) into an NRE deposit. Assume both earn the same percentage return, to keep the point simple.
| Rate at maturity | FCNR(B) principal returned | NRE principal if repatriated |
|---|---|---|
| Rs 90 to the dollar | USD 10,000 | About USD 8,889 |
| Rs 75 to the dollar | USD 10,000 | About USD 10,667 |
The NRE deposit carries the exchange rate risk in both directions. If your goal is spending in rupees, for example buying a flat in India, the exposure runs the other way for FCNR(B), because its rupee value at maturity is uncertain. Real rates on the two products differ, so neither always wins.
Withdrawing early
- NRE. The bank must have a penalty policy approved by its board and disclosed when it accepts the deposit. Banks may offer NRE deposits without premature withdrawal, but a deposit of Rs 1 crore or less from an individual must have the facility. The minimum period is one year, so the seven day minimum that applies to some other deposits does not apply to NRE fixed deposits.
- FCNR(B). The bank must allow premature withdrawal on request. No interest is paid if you withdraw before one year. The bank must disclose its penalty policy, and it can levy a penalty to recover the cost of swaps. Conversion to RFC on return carries no penalty, according to the Direction.
- The Direction contains lines that can be read as pulling in different directions on penalty when you return, so ask the bank which route and penalty apply to you.
Loans against the deposit
RBI’s FAQ says loans against NRE and FCNR(B) deposits are allowed in India to the holder or a third party, with the usual margin, and the loan funds are for use in India. Premature withdrawal is not available while a loan is outstanding.
When you return to India
- An NRE deposit can be redesignated as resident, or the funds can be moved to an RFC account, immediately on return. See the guide to RFC accounts for returning NRIs.
- An FCNR(B) deposit can run to maturity at the contracted rate only if the bank allows it at its discretion on your request. It is treated as a resident deposit from the date of return and moves to a resident rupee deposit or an RFC account at maturity.
- A deposit that has run under a year when moved to RFC earns the RFC savings rate and otherwise the contracted rate, according to the Direction.
Tax in outline
- NRE interest is exempt in India for a person who is non resident under FEMA. FCNR(B) interest is exempt for a non resident and for an RNOR under the Income-tax Act, 1961. Section numbers moved in the Income-tax Act, 2025, so ask your accountant to confirm the current provision.
- Sources disagree on NRE interest once you return and become RNOR. The reading that follows FEMA status says the exemption stops when you become resident under FEMA, while FCNR(B) interest stays exempt during the RNOR period (see CasAhuja and NRI Information). Check your own position. See the guide to RNOR status for returning NRIs.
- An Indian exemption does not decide how the interest is taxed in the country where you live.
Joint holding and nomination
- NRE and FCNR(B) deposits can be held jointly by two or more non residents. An NRE account can also be joint with a resident relative on a former or survivor basis, where the relative can operate it under a power of attorney for local payments or remittance to the holder.
- Banks offer nomination. Add one. If the depositor dies, interest on a claim at maturity is at the contracted rate, and on an earlier claim is at the rate for the period run, with no pre payment penalty.
A short decision list
| Question | Points toward |
|---|---|
| Will you spend in rupees in India soon? | NRE, which is already in rupees, if you accept the conversion rate you get. |
| Do you want to avoid exchange rate movement on the deposit? | FCNR(B), held in foreign currency. |
| Are you likely to return within the tenure? | Ask how the bank treats the deposit on return, and the penalty. |
| Do you need to borrow against it? | Both allow it in India, with conditions. |
See the NRE vs NRO guide for the account types and the guide to opening an NRI bank account for opening one.
Frequently Asked Questions
What is the main difference between FCNR(B) and NRE fixed deposits?
An FCNR(B) deposit is in a foreign currency and an NRE deposit is in rupees. The currency risk on the deposit sits with the NRE depositor, who converts money at the rate on the day.
Which has the longer tenure?
FCNR(B) runs from one to five years. NRE has a one year minimum with the longest tenure set by the bank.
Is interest on both tax free?
NRE interest is exempt while you are non resident under FEMA, and FCNR(B) interest is exempt for non residents and RNOR. An Indian exemption does not decide the tax in your country of residence.
Can I withdraw early?
FCNR(B) must allow it on request, with no interest before one year. NRE depends on the bank’s disclosed policy, with a minimum for some deposits.
What happens to an FCNR(B) deposit if I return to India?
The bank may let it run to maturity at the contracted rate if you request it. It is not automatic.
Which pays more?
It depends on the bank and the day. This guide quotes no rates. Compare current rates and the currency risk.
Sources
| Point | Source |
|---|---|
| Tenure, interest, withdrawal and return | RBI Interest Rate on Deposits Directions, 2025 |
| Currency, loans, joint accounts | RBI FAQ on accounts in India by non residents |
| Tax on return (commentary) | CasAhuja and NRI Information |
Reviewed on 30 October 2026. Check the current RBI Direction, the Income-tax Act provisions and your bank’s terms before you decide. This guide has not been reviewed by a financial adviser or a chartered accountant.
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