NRI Fixed Deposit: Whenever secure investment is discussed, Fixed Deposits (FDs) come to mind. But do individuals earning money abroad invest in India? The answer is yes; a person living abroad can easily invest their earnings in India. Two of the country’s major banks offer an NRI Fixed Deposit option known as an NRE FD. These deposits earn interest at rates determined by the bank.

We are referring to major banks such as SBI and PNB that offer NRE deposit facilities to customers. Interest rates vary depending on the tenure of the FD. According to PNB’s official rate list, interest rates of 6.25% for a one-year tenure and up to 6.60% for a 444-day tenure are offered on FDs with a deposit amount of less than ₹3 crore. Similarly, SBI sets varying interest rates for different tenures under its NRI FD plans. Therefore, before opening an FD, it is crucial for NRI investors to understand not just the interest rates, but also the tenure and the rules regarding premature withdrawal.

What is an NRI FD?

This type of FD is specifically designed for individuals living abroad. An Indian citizen earning money overseas can deposit their foreign earnings into an NRE account in India; an NRE FD can then be created using funds from this account. A key feature of this FD is that both the principal amount and the accrued interest are denominated in Indian Rupees. Additionally, eligible NRIs benefit from tax exemptions on the interest earned on these accounts. According to the Income Tax Department, this exemption on NRE account interest is provided under current income tax laws.

What interest rate does SBI offer on NRE FDs?

SBI, the country’s largest public sector bank, offers dedicated deposit plans for its NRI customers. The interest rate on your FD depends on the deposit tenure and the type of FD. For SBI NRI FDs, the interest rates are set at 6.25% for tenures of 1 to 2 years and 6.40% for tenures of 2 to 3 years. Interest rates may vary by tenure, and bank rates are subject to change over time. Therefore, please check the current interest rates on SBI’s official website before opening an FD.

What interest rate is offered on PNB NRE FDs?

PNB also offers NRE term deposit facilities to NRI customers. According to PNB’s official interest rate list, NRE FD rates for amounts below ₹3 crore are determined by tenure. Specifically, the bank offers 6.25% for a 1-year FD; 6.30% for tenures ranging from 1 year to 389 days, 390 days, and 391 to 443 days; 6.60% for a 444-day FD; 6.50% for a 666-day FD; 6.30% for 2 to 3-year and 1204-day FDs; and 6% for 5-year FDs. These rates apply to NRE term deposits of less than ₹3 crore as per PNB’s official list. Interest rates are subject to change.

What makes the 444-day FD special?

PNB offers an interest rate of 6.60% on its 444-day FD, which is higher than the rates offered for standard tenures. This means that if an NRI plans to invest for around 1.5 years, instead of standard 1-year or 2-year Fixed Deposits (FDs), they could consider FDs with specific tenures, such as 444 days. However, one should not choose an FD solely based on a higher interest rate.

How ​​much interest will an FD of ₹5 lakh earn?

Suppose you open an NRE FD of ₹5 lakh; it earns interest at 6.25%. Based on this, you would receive ₹31,250 in interest over one year. The actual interest calculation may vary depending on the type of FD, the interest payment option, and the bank’s specific calculation method. If the FD is cumulative and the interest is reinvested, the maturity amount will be higher due to compounding.

How ​​much interest will an FD of ₹10 lakh earn?

Suppose you open an NRE FD of ₹10 lakh with a one-year tenure at an interest rate of 6.25%; you would earn ₹62,500 in interest alone. If the interest is reinvested in the FD, the maturity amount will vary depending on the bank’s compounding policy.

Is NRI FD income taxable?

According to the Income Tax Department, interest earned on NRE accounts is tax-exempt. However, for this exemption to apply, the individual must qualify as a ‘non-resident’ under FEMA regulations and meet the applicable conditions. This means that the tax treatment of FD interest for eligible foreign citizens differs from that of standard domestic FDs; simply put, the tax rules for NRIs are somewhat different.

Do senior citizens get extra interest on NRE FDs?

While many banks in India offer additional interest to senior citizens on standard FDs, it is incorrect to assume that the same facility applies to NRI NRE FDs in the same way as to standard domestic senior citizen FDs. Therefore, if you are an NRI aged 60 or above, make sure to check the bank’s terms and conditions for NRE FDs before booking one.

What should you consider before investing in an NRE FD?

While Fixed Deposits (FDs) are considered safe investments, there are certain factors to keep in mind before opening one. Before investing, be sure to check the interest rates and the specific terms of the FD. It is also crucial to read the rules regarding premature withdrawal and gather information on the tenure, maturity, and applicable interest rates.

Which is better: SBI or PNB NRE FD?

If your goal is safety and investing with a public sector bank, both SBI and PNB are major government-owned banks. However, if your primary objective is to secure the highest interest rate, you should compare the rates offered by both banks for the same tenure. Currently, PNB offers an interest rate of 6.60% on FDs with a tenure of 444 days.

Conclusion

NRE FDs are a popular option for NRI customers to park funds in India and earn fixed interest. Major banks like SBI and PNB offer varying interest rates based on the deposit tenure. According to PNB’s current official rate list, interest rates on NRE FDs with tenures of less than ₹3 crore range from 6.25% for a 1-year tenure to 6.60% for a 444-day tenure. SBI also offers interest rates that vary by tenure. Investors should compare interest rates across banks before opening an FD.