Introduction
Did you know that NRIs can avail fixed deposits in 15 foreign currencies like the US Dollar (USD), Euro (EUR), British Pound (GBP), UAE Dirham (AED), Australian Dollar (AUD) and Singaporean Dollar (SGD) out of India in GIFT City, Gujarat?
Read on the blogpost to know more about GIFT City and how you can go about booking a fixed deposit in GIFT City.
What are fixed deposits in GIFT City?
GIFT City located near Gandhinagar in Gujarat is India’s off-shore entity on par with other off-shore entities like Dubai, Mauritius, and Singapore. Indian and foreign banks have been allowed to set up branches under the International Financial Services Centre (IFSC) Authority at GIFT (Gujarat International Finance Tec-City) City in Gandhinagar, Gujarat.
An IBU, which stands for IFSC Banking Unit, is equivalent to an overseas branch of an Indian bank set up under the Banking Regulation Act 1949, permitted by the Reserve Bank of India. Branches of the banks (set up as IBU in GIFT City) are created as overseas branches or foreign branches, these branches offer FDs in foreign currency. These FDs may be in USD, GBP, EUR, AED and AUD. Such FDs allow NRIs to maintain FDs in foreign currencies instead of converting their money into INR and then investing. As an investor, this protects you from the risk of fluctuation of the Indian Rupee (INR).
These foreign currency IBU FDs are different from FCNR deposits as well as NRE savings/deposit accounts offered by most banks across India. Additionally, the typical minimum tenure of an FCNR Deposit is 1 year, while FDs offered by IBUs can have shorter tenures and generally offer a wider range of tenure options as well. The bank branches in IBU GIFT City may also offer these fixed deposits to foreign nationals as these branches are treated as overseas branches.
Why Should NRIs Consider Fixed Deposits in GIFT City?
GIFT City FDs are often considered better for NRIs than regular Indian FDs. Many international and Indian banks have their branches in GIFT City.
GIFT City FDs are better because they typically offer higher interest rates than NRE/NRO deposits. The transactions in GIFT City are exempted from GST, STT, and with-holding tax etc. Added to the banks outside GIFT City are denominated in international currencies like USD protecting the investor’s money from INR depreciation. The combination of all these leads to better returns for investors’ investing out of GIFT City.
The International Financial Services Centre (IFSC) provides a simplified and streamlined regulatory framework. This makes the process of opening and managing bank accounts in GIFT City easier for NRIs.
The combination of good returns, ease of banking and access to global financial services makes it a strong proposition for the NRIs to invest in GIFT City.
Eligibility Criteria for NRI Fixed Deposits in GIFT City
To invest in a GIFT City fixed deposit (FD), an NRI must meet certain eligibility criteria. The primary criteria for opening is that the Individual concerned should be Indian citizens living outside India for work, business or other reasons. Individuals having a Person of Indian Origin (PIO) status, and Overseas Citizen of India (OCI) cardholder status are also eligible to open their GIFT City accounts.
They must provide documents like passport, visa, and proof of overseas address to comply with the KYC norms.
ICICI Bank recommends that NRIs consult a financial advisor to ensure compliance with all applicable rules and regulations.
Top banks offering fixed deposits in GIFT City
Major Indian and International banks have their branches out of GIFT City. Indian banks such as SBI, Bank of Baroda, HDFC Bank, IDFC Bank, etc. have their branches in GIFT City.
Other than this international banks like HSBC, Standard Chartered Bank, etc. have their branches in GIFT City.
You can now check out the interest rates being offered GIFT City branches of different banks through the FD comparison tool. This tool consolidates the interest rates offered by different Indian banks with branches in GIFT City. You can compare the interest across banks and across different tenures using this tool.
Tax benefits & regulations for NRI FDs in GIFT City
GIFT City operates as a Special Economic Zone (SEZ) which gives the entities operating out of GIFT City tax exemptions. The banking units pass on these benefits to the NRI customers by offering competitive products. Other than this NRIs investing in GIFT City can benefit from tax exemptions on interest income, GST, withholding tax and capital gains tax.
Banking units here are regulated by IFSCA which combines the regulatory powers, and authority of RBI, IRDA, SEBI, and PFRDA. NRIs also benefit from reduced risk of currency exchange, shorter tenures, and no interest penalties for early withdrawal on term deposits.
How to open a fixed deposit in GIFT City as an NRI
To open a Fixed Deposit (FD) in GIFT City as an NRI, you can approach a bank operating within GIFT City. Only NRIs and foreign nationals are eligible for opening bank accounts and booking FDs in GIFT City branches of the bank. In that you will have to choose the type of bank account which you want to open which can be an NRE or FCNR account or offshore account.
After this, you will have to complete the documentation required by the bank. In addition to this, you will have to deposit the minimum balance amount set by the bank. To book a GIFT City FD you need to open an offshore account.
You can also check out our app which offers GIFT City FD without the requirements of opening a new bank account.
Risks & considerations for NRI fixed deposits in GIFT City
GIFT City investments do not carry much risk free due to denomination in foreign currency, no taxation on returns and regulation by IFSCA. However, there might be higher minimum investment requirements by the bank.
Conclusion
Foreign currency term deposits with Indian IBUs are a great investment option for NRIs. They are more advantageous than term deposits offered by NRE/NRO or FCNR in terms of better returns, and repatriability.
You can check out Belong’s FD tool which provides updated FD rates across banks that are offering GIFT City FD.
