NRIs can maintain the accounts in Indian Rupee or in important foreign currencies like, US Dollar, Japanese Yen, European Euro or UK Pound Sterling. Foreign Currency accounts in India can be maintained only in the form of Term Deposits ranging from one year (previously 6 months) to 3 years.
The minimum period of such deposits has since been raised to one year from end-October 1999. The importance of foreign currency accounts is that the repayment of deposit on maturity and periodical interest will be paid in the same currency of deposit.
In other words, if a term deposit account is maintained in US Dollar currency for 3 years at 3.0 per cent interest per annum, both the deposit money and interest payments will be paid back in US Dollar. The advantage of these accounts is that the value of deposit does not fall or rise with a fall or rise in the value of exchange rate of rupee.