Economics · Banking Regulation and Foreign Currency Accounts
Regarding the operational guidelines for Foreign Currency Non-Resident (Bank) [FCNR(B)] accounts maintained with Indian banks, which of the following represents the correct regulatory framework regarding permitted currencies, maturity periods, and interest calculation?
- 1The deposit must be in Indian Rupees, but the exchange risk is borne by the bank, and the maturity period is fixed at exactly three years with simple interest paid at maturity.
- 2The account can be maintained in any permitted currency for a period of one year to five years, and interest is calculated on a 360-day year basis with compounding at half-yearly intervals.✓
- 3The account is restricted to four major currencies (USD, GBP, EUR, JPY) for a maturity of one to three years, and interest is paid out monthly without any compounding.
- 4The account can be opened in any freely convertible currency for a period ranging from one year to ten years, and interest is calculated on a 360-day year basis compounded annually.
Correct answer
The account can be maintained in any permitted currency for a period of one year to five years, and interest is calculated on a 360-day year basis with compounding at half-yearly intervals.
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