Do You Know These 4 Facts About FCNR Deposits?

In order to create a corpus, one needs a good amount of savings and investments. You can put away your money in bank fixed and recurring deposits or even invest in the share market. The idea is to plan your investments in such a way that you can accrue high returns and also liquefy the investment if and when needed. If you are a conservative investor, preferring to park your savings securely, a fixed deposit is the best way to go. NRIs, too, can make FDs out of their foreign currency earnings. Yes, you can open a Foreign Currency Non-Repatriable deposit or FCNR deposit. But do you know these 4 essential facts about this foreign currency deposit? Here’s all you need to know

1. FCNR is not exactly an account, but a fixed deposit

Most NRIs generally assume that FCNR is an account, but the fact is that it is a deposit. As an NRI, you can open a Non Resident External Rupee of NRE account and/or an NON Resident Ordinary Rupee or NRO account. You can deposit foreign currencies in the former account and Indian Rupees in the later. Once you have a good amount of savings in the NRE account, you can make a fixed deposit from it. These FDs could be termed as NRE fixed deposits, a term used interchangeably with foreign currency deposits.

2. You can maintain deposits in different major currencies

Most banks allow you to maintain your fixed deposit in different, major international currencies. Generally, the currencies in which you can maintain your FCNR deposits include Great Britain Pound Sterling, Euros, Japanese Yen, Swiss Francs, Danish Krone and Swedish Krona. You can also maintain the FD in different types of dollars which include American, Australian, New Zealand, Canadian and Singaporean Dollars.

3. You should know the minimum and maximum tenure and the penalties for premature withdrawals

Fixed Deposit for NRI can be opened for a minimum duration of 1 year, whereas the maximum FD tenure is generally 5 years. A handful of banks may also offer 10 year tenures for foreign currency fixed deposits. The greatest advantage of these deposits is that they are risk averse and you do not have to worry about currency fluctuations. Also, the interest you earn on these FDs is in the foreign currency in which the FD is maintained. You may also prematurely withdraw your FD before your chosen tenure ends, but you have to bear a penalty for premature withdrawals. If you decide to break your fixed deposit, before the minimum 1 year tenure, you may not be eligible to earn any interest pay out on your deposit.

4. You can open the deposit online

As an NRI, it may not be possible for you to visit your bank in India and create a fixed deposit account. This is why all banks offering NRI services, allow you to make your NRI fixed deposit online. That said the main source account for the foreign currency fixed deposit should be a foreign currency account opened overseas or an NRE account in India. You can easily create the FD by transferring funds from either of the bank account through wire transfers. You may also create this FD while you are in India by depositing a travellers’ cheque or make foreign currency cash deposits.
As is apparent from the term FCNR, this is a non-repatriable deposit. That said, you can completely repatriate the principal amount of the fixed deposit and the interest earned on it, when your FD matures. You also earn interest on a half-yearly basis on these deposits.

Why Is Zero-Balance Savings Account Popular?

When you visit a bank to open an account, you have numerous options to choose from. For choosing an account that best suits your needs, you must first understand the concepts behind each one of them and be aware of their underlying differences.

Zero-balance savings account
A zero-balance saving account offers you the facility to open an account with no need of minimum balance at the time of opening an account. Usually provided by major banks, zero-balance savings account assists you to withdraw money as and when required, thus addressing your liquidity needs.
In most cases, the account offers additional facilities such as ATM cum debit card, mobile banking, internet banking, and online money transfer.

This saving account is given to the class of customers such as salary account holders and under the Pradhan Mantri Jan Dhan Yojana. PMJDY is a scheme with the aim of financial inclusion.

Features of zero-balance account

• No restrictions on maintaining a regular monthly balance.
• No charges levied on the debit card or ATM card.
• Free passbook issued at the time of opening the account.
• Free net banking facility to account holders.
• Offers unique benefits for salary account holders based on the businesses

Difference between Zero balance savings account and regular savings account
Generally, you must keep a minimum Monthly Average Balance (MAB) in your regular savings account. If it is challenging to maintain the minimum required balance in your account, non-maintenance charges will be levied

Documents required:
For opening the zero-balance saving account, you just must submit the necessary KYC documents like identity and residence proof.

Other benefits of zero balance savings account
High-interest rates: When you open zero-balance savings account online, the interest rates are higher than the manual option. Although no minimum balance is considered for this purpose, the online route has more advantages.

Easy to open: Your PAN and Aadhaar are enough to open zero-balance account. You need to set a PIN then and start using the account. The welcome kit will also contain chequebook and a debit card which is integrated with the mobile banking apps.

No KYC balance up to INR 1 lakh: Such accounts allow you to maintain a certain amount of funds, especially for new holders. The maximum permitted balance by banks is INR 1 lakh.

Transaction charges: One of the many perks is zero transaction costs. If you wish to withdraw or deposit some funds, do not worry about deduction or transaction costs. Mobile banking apps need a unique authentication password known as mPIN for authenticating payments and transactions.

Shopping and entertainment: These are two areas of life that no one wants to comprise on. The virtual debit card enables you to pay for your favourite product at all the sales terminals.

Benefits of savings account opened under PMJDY

• Not required to keep a minimum balance.
• Interest on deposits as per current bank rates.
• Accident-insurance cover of Rs. 1 lakh.
• Direct transfer from government schemes is credited in the account.
• Your have overdraft facility also available for 6 months.

How To Educate Children About Money Management?

If you are tired of always using ‘no money' excuse to deny a toy to your kid, then perhaps it is time to educate your child about the importance of money and spending it wisely. By teaching your child about the importance of money, will not only guide them to the future, but also give you an activity to do together.

Today, where life is moving fast, it is challenging to spend time with your loved ones. However, it is crucial to indulge in activities with your loved ones. Some activities can be a blessing in disguise. One such activity that you can indulge in with your child is to teach them value of money. Nothing supports this activity than savings account.

There are other ways to educate your child about significance of funds as well. They include -

Discuss money

Your job is half done when you approach the topic with a healthy attitude. It is essential to encourage healthy participation. So, address the topic at the right time and with a healthy approach.
One way to address the topic of money management, is to discuss questions like why you cannot purchase the toy? Are we poor or rich? Address these questions by highlighting on beliefs like hard work, saving, cautious spending and charity will help your child see the value of money and propel your child’s mind towards money management.

It is essential to be mindful when discussing this topic as there is a fine line between your child recognising your intentions and thinking you are a penny-pincher. So, try and encourage them with discussions about managing money.

Have a savings account
Have a savings account opened for your child; it will guide your child to value money. Foster the habit to save money and encourage your child to make frequent deposits. Also, explain to them about bank interest.

Try to open zero balance account in a bank that offers children's accounts. You could open one using mobile banking apps as well. A child’s account is generally a joint account managed by the parents until the child is old enough to manage it. When they are mature enough to understand, teach them simple banking tasks like depositing cash and cheques, how to check their bank balance, etc.

Price Evaluation
Evaluating or comparing prices of products is a way to smart buying. By teaching this be assured, you will encourage careful and not reckless spending habits. This activity involves you and your child compare the prices of two products probably branded and local, check the quantity and quality; and decide on which one to buy.

Encourage charity
Besides teaching your child about saving and spending and investing wisely, also encourage them to do charity. It is a good quality which makes your child a caring human being. You can do this by keeping a jar with ‘charity’ written on it and urge your child to put in a specific amount regularly. Use this money to fund a useful purpose or donate it to a reputed charitable organisation.
It is vital to educate your children about the significance of money at a young age so that they can be mature adults and make wise choices related to money in their life.