3 days ago
UAE NRIs Weigh Dollar Holdings Against FCNR(B) Deposits
People living in the UAE often earn and save money connected to the US dollar.
This is because the UAE dirham is linked to the dollar.
Keeping money in dollar-based investments can help protect savings if the Indian rupee loses value.
An FCNR(B) deposit is another way to keep money in a foreign currency while earning a fixed return.
The money in these deposits can usually be sent back to the investor’s country as allowed by the rules.
However, some higher-rate deposits require keeping the money invested for three to five years.
Keeping dollars abroad may be better for people who need quick access to their money.
Eligible NRIs generally do not pay Indian tax on FCNR(B) interest, but local tax rules must also be checked.
Experts suggest combining dollar assets with some INR savings for Indian expenses.
The UAE dirham’s peg to the US dollar makes dollar-linked assets attractive to UAE-based NRIs.
The Indian rupee has depreciated by roughly 3% annually against the dollar since 1991, according to Ankur Choudhary.
FCNR(B) deposits preserve principal and interest in foreign currency while offering fixed returns and repatriability.
Some Indian banks have offered FCNR rates above 7%, but the special concessional swap facility is scheduled to close on August 31.
A mix of long-term dollar assets, FCNR deposits and smaller INR holdings may balance currency protection, returns and liquidity.
- Who
- UAE-based non-resident Indians and other eligible NRIs, with guidance from Ankur Choudhary.
- What
- They are weighing dollar-denominated assets held abroad against FCNR(B) deposits in India.
- Where
- The options involve savings held abroad and deposits with Indian banks.
- When
- The comparison is relevant now; the special FCNR concessional swap facility is scheduled to close on August 31.
- Why
- The decision depends on protection from rupee depreciation, fixed returns, liquidity needs, tax treatment and repatriability.
Keep Dollars Abroad
Use FCNR(B) Deposits
Currency protection
Keep Dollars Abroad
Holding dollar-denominated assets can hedge savings against long-term depreciation of the Indian rupee.
Use FCNR(B) Deposits
FCNR(B) deposits also maintain the principal and interest in foreign currency, limiting direct INR currency risk.
Returns
Keep Dollars Abroad
Dollar holdings abroad provide access to global investment opportunities, though the article does not specify a fixed return.
Use FCNR(B) Deposits
FCNR(B) deposits offer predictable fixed returns, with some banks reportedly offering rates above 7%.
Access to money
Keep Dollars Abroad
Keeping dollars abroad may be more suitable for near-term needs such as property purchases, education or other major expenses.
Use FCNR(B) Deposits
Higher FCNR rates may require locking money in for three to five years, which can reduce liquidity.
Key facts
- Currency link
- The UAE dirham is pegged to the US dollar.
- Reported rupee depreciation
- The rupee has depreciated by roughly 3% annually against the dollar since 1991, according to Ankur Choudhary.
- FCNR(B) currency
- Eligible FCNR(B) deposits maintain principal and interest in foreign currency rather than Indian rupees.
- Reported FCNR rates
- Several Indian banks have offered rates above 7% under the special concessional swap facility.
- Facility deadline
- The special concessional swap window is scheduled to close on August 31.
- Potential investment horizon
- Higher FCNR rates may involve a three-to-five-year investment period.
- Indian tax treatment
- FCNR(B) interest is generally tax-free in India for eligible NRIs, subject to applicable conditions.
Quotes
Ankur Choudhary
CEO and co-founder of Belong, a GIFT City-based retail investment app
“Keeping dollars abroad may be more suitable for those who need greater liquidity in the near term”
businesstoday.in
Sources
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