How to Invest in Fixed Deposits for NRIs| North Loop Official Blog
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28 Jun 2020

How to Invest in Fixed Deposits for NRIs

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Why NRI Deposits and Remittances Matter

While the service and growth sectors contribute a major part of the Indian economy, NRI deposits and their contribution to the Indian economy through inward remittances also constitute a large chunk of the country’s overall economic development. Every dollar transferred to India adds to the country’s foreign exchange pool. Around 25% of the total foreign exchange reserves in the country are due to remittances to India by NRIs, which makes it a significant contributor to the foreign exchange reserves of the country.
However, most of these amounts remain idle in savings account balances, earning low returns. This is the reason Non-Resident Indians (NRIs) are always looking for smart investment opportunities to grow their savings.

Reasons for Investing in Fixed Deposits

Fixed deposits are a regular income source of investment and are one of the oldest and safest investment instruments provided by the banks. The interest rates on fixed deposits are higher than interest provided on savings or current account balances and this is one of the main reasons that every individual, including NRIs, prefer to diversify their investment portfolio by investing in Fixed Deposits.

Get a zero-balance, no-fee NRE/NRO account with North Loop in 5 minutes

Some other important reasons for Investing in Fixed Deposits

a. It is risk-free and guarantees fixed returns.
b. NRE Fixed Deposits are tax-free and can earn up to 7.5% return (sign up here)
c. Fixed Deposit interest rates are higher than other risk-free investment instruments like Treasury Bills or Government Bonds.
d. Fixed Deposits provide a flexible tenure of investment. The investor can choose any time-period for investments in Fixed Deposits and this time frame usually varies from 7 to 10 years.
e. Loans or overdrafts can be availed against Fixed Deposits whenever required and this becomes beneficial to the investors (find out more here).
f. It is a fairly liquid investment. As and when required, the FD’s can be broken either partially or completely by the investors.
g. It does not depend on market fluctuations and is thus safer.

Investment in Fixed Deposit for NRIs

A fixed deposit is known for its guaranteed returns and is ideal for NRIs who are risk-averse. Investment in fixed deposits gives NRIs an option to diversify their portfolio and increase their savings. Unlike other investment options, NRI Fixed Deposit helps them to earn guaranteed returns that are not affected by market fluctuations. But NRIs must remember that they can do so with their NRO, or NRE accounts, and the corpus earned at the time of maturity also gets credited to their NRO account. However, the quantum depends on the interest rate offered by the issuer. This means that they can maximize their Fixed Deposit earnings by comparing several issuers and picking out the Fixed Deposit with the best interest rates. You can compare FD rates here.

The 2 main types of Fixed Deposit Accounts that allow NRIs to invest in fixed deposit in India are:

Non-resident External Account- This is an account that helps NRIs keep their foreign earnings in India, and in Indian denomination. Moreover, deposits in NRE accounts are Tax-Free, i.e. the principal amount, and the interest earned thereon, is both exempt from tax. This account is opted for by NRIs if they wish to hold or maintain their overseas earnings in Indian currency.

Non-resident Ordinary Account- This is an account that helps NRIs keep their earnings from India in Indian Denomination. However, the interest earned in NRO accounts is subject to TDS (Tax Deductible at Source). The purpose of this account is to save earnings from India in Indian currency itself. Check out the difference in NRE and NRO accounts here.

How Fixed Deposit Interest Rates affect Returns

FDs are offered to non-resident Indians by many financial institutions like banks, corporates, and housing finance companies. However, the interest rate offered by corporates is generally higher than that offered by the banks. The rate of interest also depends on varying factors like the amount deposited and the tenure of the deposit. Most banks offer a current rate of interest on NRO FDs, and the rate with effect from June 16, 2020, is between 2.75% and 5.50%, depending on the maturity period, and that on NRE FDs is between 5.15% to 5.50%. However, if you get an FD with North Loop, you can earn the highest rate in the banking industry of 7.5%.

Benefits of North Loop

Diversify your portfolio, increase your savings and grow your wealth with North Loop- the financial hub for NRIs. Get industry-leading FD rates of 7.5% - all done digitally in a matter of minutes.

Suggested Reads:

How do Bank FDs Compare with Corporate FDs

Liquid Funds vs FDs – Which is a Better Option

NRE vs NRO Difference

HDFC Bank NRI Banking Review: Everything You Need to Know

Which Bank in India is Providing the Best FD and RD Return Rates

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.