Sunday, January 8, 2017

Why open RFC (Resident Foreign Currency) Savings Account or Fixed Deposit

An RFC (Resident Foreign Currency) Savings Account is a savings account maintained in foreign currencies e..g USD, CAD, EURO or GBP for NRIs who have returned to India for good but has some foreign currency fund to park. One of the main reason of opening RFC account is that you can also open the RFC account as term deposit to park your foreign currency, which you can later transfer into NRE or FCNR accounts when you gain your NRI status back e.g. when you moved to abroad again.

So, if you are returning India for a couple of years or for a temporary basis, it's a wise decision to open Resident Foreign Currency (RFC) account. The best part of the RFC account, both saving and fixed deposit, is that funds in the accounts including the interest are freely repatriable. You can also open this account in any freely convertible foreign currency but not all bank allow all currency.
Most of the banks e.g. ICICI only allow you to open RFC account on USD (US dollar) or GBP (pound). Let's see the eligibility criterion to open RFC saving and term deposit account and some more features, details and benefits of RFC accounts for NRIs returning India for good.

Eligibility Criterion for Opening RFC Account

Both NRIs and PIOs can open RFC account. Generally, any Persons of Indian nationality or origin, having been resident outside India for a continuous period of not less than one year, and having become person resident in India on or after 18th April 1992 are eligible to open and maintain RFC accounts with banks in India. The RFC account may be opened any time after the NRI’s return to India.
RFC saving account and fixed deposit features and benefits

Important points about RFC (Resident Foreign currency) accounts

As I told, this account is mainly for returning Indians, who wants to park their foreign currency with Indian banks so that later they can remit it overseas when they get their NRI status back. You should already my post about what happens to NRE, FCNR and NRO account when NRI returns to India, that will give you more information about why RFC account is so important. Here is a couple of more important points about RFC accounts, both saving and term deposit.

1) RFC accounts can be opened by returning NRIs/ PIOs to transfer balances held in NRE/ FCNR(B) accounts.

2) Returning Indians can also deposit foreign currency into RFC fixed deposit account to earn some interest. It's similar to FCNR fixed deposit as the deposit is maintained in foreign currency.

3) RFC accounts can be maintained in the form of current, savings or term deposit accounts where the account holder is an individual and in the form of current or term deposits in all other cases.

4) Most important benefit of opening RFC account is that you can freely remit the funds in these account to overseas including interest.

5) You can open RFC accounts jointly with resident Indians but only with close relatives e.g. Mother, Father, Wife, Husband, Children etc. However, the resident joint account holder (close relatives) is not allowed to operate the account during the lifetime of the returned NRI account holder. This is a little bit different with NRE joint accounts where joint holder can operate the account except remitting funds overseas to anyone other than the beneficiary himself.

6) Different banks allow you to open RFC account in different foreign currency e.g. ICICI bank allows you to open RFC account in GBP and USD while HDFC bank allows you to maintain RFC account in USD, GBP and EURO. State Bank of India, the SBI also allows RFC account in USD, EURO and GBP. Fortunately, Axis bank has more coverage and allows you to open RFC account in 5 major currencies e.g. USD, GBP, EURO, AUD and CAD. I think it's one of the very few banks which allows you to open RFC account in the Australian and Canadian dollar.

7) Generally, Interest is credited half yearly to the respective RFC savings bank account, but it could be different between different banks. I know for sure that HDFC credit interest half yearly, but you should check your bank website for interest payout information.

8) Pension from abroad can also be credited to your RFC Savings Account.

9) You can also use the funds from RFC saving account for local payments. The amount will be converted and credited to the customer's resident saving account.

10) If you again become NRI then the funds parked in RFC account can be transferred to NRE/FCNR account.

11) You can withdraw cash from RFC account in India, money would be converted based upon an exchange rate of the bank for foreign currency and Indian rupees.

12) For first two years, no TDS is deducted from your RFC term deposit account, which can be huge tax saving depending upon the amount. Banks also provides automatic renewal and nomination facility for RFC fixed deposit account.

That's all about RFC or Resident Foreign currency Account. If you are a returning Indian, then you should open an RFC saving account or term deposit because RFC accounts provide safe parking for your foreign currency funds. It can be funded with any convertible foreign currency. Most important, if you change status to NRI again, this money can be transferred to an NRE/FCNR account.


  1. I am not sure if you are the right person to ask this...Let's say I deposit 10000 USD to this resident foreign currency account. Will I be able to do a wire transfer of 10000 back to the US in the future without any paperwork?

    1. Good question. The answer is yes legally because that is the meaning of "freely repatriable
      However most Indian banks , especially state bank officials are grossly ignorant of rules & insist on filling tons of wrong forms etc. They are all busy drinking tea and to expect them to understand RBI rules is toouch! Ravi