Sunday, January 22, 2017

Good time to invest in NRE Fixed Deposit in India

Why Invest in NRE Fixed Deposit in India?
NRE Fixed Deposit is very hot at this moment with soaring interest rate and very lucrative Exchange rates from USD to INR, SGD to INR and from other foreign currencies. For all those Indian who are living abroad or working abroad mostly my fellow IT Professionals, it’s good to invest in NRE Fixed deposit in India. As we know the successful key of Savings and Investment is diversification and Fixed Income forms a big part of it and always say that at least have your 50% money in Fixed deposits because of liquidity, security and ease of investment as an option it provides. NRE Fixed Deposit is even more special because all principle and interest earned on this account are TAX-FREE in India. So it’s the best way to bring foreign currency in India. The earlier rate of Interest on NRE Fixed deposit was quite low as compared to Resident savings account but now it's even at par of Resident account and many private banks are offering rates in the range of 9.2 to 9.6% per year with quarterly compounding basis.

Benefits of NRE Fixed Deposit Account

As I said the earlier biggest advantage of NRE Savings account or NRE Fixed Despot is that it's TAX-FREE, so you don't need to pay any taxes in India for all the money you put in your NRE Fixed deposit or NRE Savings account. Also, TDS is not deducted from interest earned on NRE fixed deposit. That means more than 10% per year without any hassle.

Here are some other advantages of NRE Fixed Deposit Accounts:

1) Both principle and interest earned are fully convertible into foreign currency and allowed to send back.

2) Both principle and interest earned on fixed deposit are exempted from income tax and wealth tax.

3) Convenient access because most of the private banks like HDFC, Kotak are providing online access to NRE fixed deposit.

4) Exchange rates are the peak at the moment so double benefit if you want to store some money in INR.

5) Higher interest rates, 9.5 percent annum are the very decent interest rate.

Private Banks which are offering NRE Fixed deposit account

If you already have an NRE savings account then it’s even easier because you can open fixed deposit online but if you don't have any NRE savings account than there are two way to open NRE Fixed deposits, first open an NRE Savings account and then create FD or just open NRE Fixed deposit. Most of the private banks have their NRI Service representative call you once you fill their form. So it’s pretty easy to open an NRE fixed deposit. Even some of the banks have courier services which can pick your completed form for dispatching to their India offices. Though opening this account may take 10-15 days its worth an effort given a best exchange and interest rate. Following are some good private and public sector banks which are offering NRE Fixed deposit account:

1) HDFC Bank offering around 9.3 for 1-year deposit. Interest gets lower with tenure increases around 8.25 for 3 years. Check HDFC bank website for the latest interest rate on NRE fixed deposit.

2) Kotak Mahindra Bank also has decent NRI Services and offering around 9.6% per annum best of the lot.

3) ICICI bank

4) IDBI Bank

5) Axis Bank is my favorite bank because of convenient online access and presence is most of the places like Singapore etc.

On public sector banks, SBI is offering very decent rates somewhere around 9.5 though I haven't checked their site for a while.

Frequently asked Question on NRE and NRO Fixed deposit accounts

Here are some of the frequently asked question related to NRE and NRO fixed deposit account. Many NRI has these doubts in mind while opening NRE and NRO fixed deposits:

Can NRI open both NRE and NRO Fixed Deposits In Indian Bank?

Yes, an NRI can open NRE and NRO Fixed deposit on an Indian Bank like ICICI Bank, HDFC Bank, SBI, AXIS Bank, Kotak Mahindra and some foreign banks like RBS. You can open both NRE and NRO Fixed deposit in either same bank or different bank. The advantage of having NRE and NRO fixed deposit in one bank is ease of management but splitting them between multiple banks you can get some benefit on interest rates because of competition. The best approach is to open NRE and NRO fixed deposit tied with your online NRE Savings account with any of those major Indian banks e.g. ICICI Bank, HDFC Bank, SBI, AXIS Bank, Kotak Mahindra. Another frequently asked question about NRE Fixed deposit is:

Does interest earned on NRE and NRO Fixed deposit is taxable in India?

In the case of NRE Fixed deposit, Interest earned or interest accrued is tax-free in India and you can fully resend that amount to your foreign bank, But Interest earned on NRO Fixed deposit is taxable in India that too with very high rates around 30%. NRE fixed deposit, interest earned is exempted from income tax in India according to Income Tax act and you don't need to pay any income tax on principle and interest earned on capital. For NRO fixed deposit, interest earned is not exempted from tax and you need to pay tax with a rate of @30.9% with Base rate - 30%, Education cess - 2%, Secondary & higher education cess - 1%).

Overall I think its good opportunity to park any fund which you want to keep in Rupees for your Indian use. Take dual benefit of soaring interest rates and peak exchange rates. My suggestion is to go with the private bank because I like there NRI services which assist you to open NRE Fixed or Saving Account easily.


  1. Hi, I am in doubt whether I should invest money in NRE fixed deposit or NRE recurring deposit, As I heard interest rates on NRE recurring deposit and fixed deposit is almost same. Can you please suggest which one is better between NRE fixed and recurring deposit ? Also is there any limit on How much money one can invest in NRE fixed deposit ? On related note which is better if I put two deposit with small amount or one deposit with big amount ?
    Should I be putting my fund on NRE fixed deposit offered by different banks on One bank is enough ?

    Please guide.

    1. If you lumpsum amounts you should opt for NRE FD, if you are planning to put monthly/periodically then opt for Recurring deposit - AA DUBAI

    2. Hi Guys, Can you please suggest which bank is offering best interest rates on NRE fixed deposit of tenure 1,2 3 or 5 years period. would be fantastic if you can compare NRE FD rates from ICICI bank vs HDFC bank vs SBI Bank in India.

    3. Hi Vicky, I think Catholic Syrian Bank is your best choice (9.60% PA and 10.45% Annualised yield(24 months)). Check it out..

  2. How about FCNR desposit ? is FCNR deposit better than NRE fixed deposit ? I am staying in USA and confused between whether I should invest in NRE fixed deposit or FCNR fixed deposit, As interest rates on FCNR is better than ever before but it still less than what NRE fixed deposits are offering, I am not sure where to go, Which one is better FCNR or NRE fixed accounts ?

  3. Before reading your article I wasn't sure whether NRI can Invest in fixed deposit in India or not. Now I am assuming that NRI Can invest in fixed deposit in India, Can you please let us know what are the options NRI have if he wants to invest his money in Fixed deposit in India. Unlike many other I don't like Investing in Indian Equities and rather I prefer more conventional way of investment which is fixed deposit. By reading your article it looks that NRI can also get higher interest rates only available to Resident customers in India. Please answer these question.

  4. Hello, Can you please provide comparison between HDFC vs ICICI vs SBI vs Kotak for there NRE , NRO and FCNR deposits ? I want to invest some money on NRE and FCNR term deposit but not sure which bank is offering best rates and best features like online presence, liquidity, premature withdrawal penalty and whether interest is compounding quarterly or half yearly etc. I heard that ICICI banks doesn't pay any interest on NRE and FCNR deposit, if you break the deposit before one year. I am not sure about HDFC or SBI also has such condition, if you could provide a quick comparison between NRE deposit on ICICI and HDFC bank would be best. Thank you very much

  5. @Saroj,
    Main difference between NRE fixed deposit from HDFC Bank , ICICI, SBI, DBS, Standard Charted, Axis bank, Kotak, HSBC, RBS or any other bank is interest rates, you might get better interest rates by researching more you might get better interest rates in terms of 0.25 or .5 bps point. rest of features of NRE deposit are actually across all banks. Some may allow partial withdrawal as well

  6. is this still a good time to invest in NRE fixed deposits in India ? I heard RBI has reduced interest rates but since USD is still strong against INR , should someone invest money in NRE or NRO fixed deposit?

  7. No doubt this is an excellent post I got a lot of knowledge after reading good luck. Theme of blog is excellent there is almost everything to read, Brilliant post.

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  8. Fixed Deposit is an investment where the interest rate is guaranteed not to change for the nominated term.The rate of interest for Fixed Deposits differs from bank to bank

  9. is it still a good time to invest in NRE fixed deposit? I heard that intrest rate has gone down and it will go down more in future? should I keep my money in foreign currency or convert it now to invest in NRE term deposit? I also have another doubt, what is difference between an NRE and an NRO fixed deposit? Does interest rate is same on both or NRE gives better return than NRO deposits?

  10. I think good time is back again, with 1 USD equal to almost 66 INR and Deutche bank offering around 8.75% for 5 years NRE fixed deposit, this is the best time to park your hard earned dollar into NRE fixed deposit.