Non-resident external (NRE) fixed deposits (FDs) are beneficial for non-resident Indians (NRIs)—those living abroad (expatriates), Indian citizens working overseas and individuals of Indian origin with foreign citizenship. The benefits to NRIs holding an NRE FD account are tax-free interest earnings in India, repatriation of principal and interest (to foreign countries), no tax deduction at source (TDS) and higher interest rates than NRE savings accounts.
NRE FDs provide a secure, tax-efficient way for NRIs to invest and manage their funds in India.
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What is an NRE savings account?
An NRE savings account is a rupee-denominated account. It could be savings, foreign currency non-resident (FCNR) account, or a fixed deposit account. You can deposit your earnings from overseas or transfer funds from one NRE account to another NRE account and in certain cases, from a non-resident ordinary (NRO) account to an NRE account along with Form 15CA/CB. The foreign currency deposited into the NRE account gets converted into rupees.
How is the NRE account different from the NRO account?
NRE and NRO accounts cater to the different financial needs of NRIs. The primary difference lies in the source of income. NRE accounts are designed to manage foreign-earned income, whereas NRO accounts are meant for handling India-sourced income, such as salaries, rentals and dividends.
Another significant distinction is repatriation. NRE accounts allow full repatriation of both principal and interest, whereas NRO accounts permit partial repatriation of up to $1 million per year. Additionally, NRE accounts are tax-free in India, while NRO accounts are subject to Indian taxation as per the income-tax Act.
In terms of currency acceptance, NRE accounts only accept foreign currency, whereas NRO accounts accept both foreign and Indian currency. Overall, NRE accounts are ideal for NRIs with foreign income seeking tax-free returns, while NRO accounts suit those managing Indian income and local expenses.
Investing in NRE FDs
Financial advisors recommend investing surplus from NRE savings accounts in NRE FDs for higher returns.
All banks offer these services, and currently, a foreign bank and an Indian private bank are offering the highest interest rate of up to 8 percent to NRE FD holders for deposits of two years. Here are the top 10 banks that offer the highest interest rates on NRE fixed deposits up to Rs 3 crore with two-year tenure. Bankbazaar has compiled the data, which is as on September 25, 2024.
Deutsche Bank FD rate
Deutsche Bank offers an interest rate of 8 percent on FDS with a tenor of two years. Among foreign lenders, this bank offers the best interest rate. In the two years, a Rs 1-lakh deposit would have grown to Rs 1.17 lakh.
RBL Bank FD rate
RBL Bank also offers an interest rate of 8 percent on two-year tenor FDs. Among private banks, RBL provides the best rates. An FD of Rs 1 lakh will grow to Rs 1.17 lakh on the maturity date.
| The most remunerative NRE deposits | ||
| Bank name | Interest rate (per annum) for two years’ tenure | How Rs 1 lakh grows in 2 years** |
| Deutsche Bank | 8.00% | 1.17 lakh |
| RBL Bank | 8.00% | 1.17 lakh |
| IndusInd Bank | 7.75% | 1.17 lakh |
| Standard Chartered Bank | 7.50% | 1.16 lakh |
| DCB Bank | 7.50% | 1.16 lakh |
| Karnataka Bank | 7.35% | 1.16 lakh |
| Bandhan Bank | 7.25% | 1.15 lakh |
| ICICI Bank | 7.25% | 1.15 lakh |
| Yes Bank | 7.25% | 1.15 lakh |
| Kotak Mahindra Bank | 7.15% | 1.15 lakh |
| Note: i. Interest rate on NRE deposits of up to Rs 3 crore for two years tenure for all listed (BSE) public & private banks, and foreign banks considered for data compilation. Banks whose websites don’t mention the data are not considered | ||
| ii. **Value calculated on the basis of quarterly compounding of interest. | ||
| Data as on respective banks’ website on September 25, 2024 | ||
| Compiled by BankBazaar.com |
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IndusInd Bank FD rate
IndusInd Bank offers an interest rate of 7.75 percent on two-year tenor FDs. If you were to invest Rs 1 lakh, the amount would have grown to Rs 1.17 lakh on the maturity date.
Standard Chartered FD rate
Standard Chartered Bank’s interest rate of 7.50 percent for a two-year FD would mean that Rs 1 lakh becomes Rs 1.16 lakh on the date of maturity.
DCB Bank FD rate
At 7.50 percent, opening a Rs 1-lakh FD with DCB Bank yields Rs 1.16 lakh at the end of the term.
Karnataka Bank FD rate
Karnataka Bank offers interest rates of 7.35 percent on its two-year FDs, meaning Rs 1 lakh will grow to Rs 1.16 lakh on the date of maturity.
Bandhan Bank FD rate
Rs 1 lakh in a two-year fixed deposit with Bandhan Bank becomes Rs 1.15 lakh on the maturity date at an interest rate of 7.25 percent.
ICICI Bank FD rate
ICICI Bank’s interest rate of 7.25 percent too results in a balance of Rs 1.15 lakh at the end of the two-year FD term.
Yes Bank FD rate
The yield and interest offered by Yes Bank is identical at Rs 1.15 lakh and 7.25 percent.
Kotak Mahindra Bank FD rate
Kotak Mahindra Bank offers the lowest interest rate in this sample, of 7.15 percent, on two-year tenor FDs. If you were to invest Rs 1 lakh, the amount would have grown to Rs 1.15 lakh on the maturity date.
Safety net
The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India, guarantees investments in fixed deposits of up to Rs 5 lakh.
