Fixed Deposits or Stocks – Better Investment Option for NRIs
29 Mar 2022

Fixed Deposits or Stocks – Better Investment Option for NRIs

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Key Takeaways

When it comes to investments for NRIs in India, there are several options. From government bonds to mutual funds and real estate, you can invest in almost everything. Yet, for NRIs, equity stocks and NRI fixed deposits remain the most popular choices. The two investments are diametrically opposite if you factor in risks and returns associated with them. So, which one will you choose?


India has been witnessing enormous economic development over the past few decades. It is no wonder that foreign direct investments are becoming increasingly popular in India. The Non-Resident Indian (NRI) population, too, is taking advantage of the various investment options available to them, in their capacity as Indian citizens. As an NRI, today, you can invest in almost every investment avenue in India. From mutual funds and bonds to direct equity, real estate and even a few government schemes. However, NRI fixed deposits, and stock market investments continue to remain the favourite investment options for NRIs. So, if you are one, what should you choose. This article may help you select the better option.

NRI Fixed Deposits

For NRIs, Fixed Deposits is one of the most attractive investments options, and rightly so. If you are residing in a country where the value of the currency is stronger than the INR, it is only fitting that you might want to take advantage of the difference. Moreover, NRI fixed deposits are ideal for conservative investors since they are primarily considered the safest investment option, wherein you can earn interest income and recoup your capital upon maturity. You also get to choose from different types of NRI fixed deposits such as:

  • NRE Account FD

    You may open a Non-Resident External (NRE) Rupee account wherein the foreign currency deposits are instantly converted to INR at the applicable currency exchange rates. You can use the same account to open an NRE FD in INR. You earn tax-free interest on your NRE FD in India, with interest rates ranging from 5% to 7%, based on your chosen investment tenure.

  • NRO Account FD

    The NRO account enables you to deposit your foreign currency earnings and manage your Indian income sources – rental income, for instance. You can create an NRO FD through the NRO account directly. A crucial point to remember is that NRO FDs are just like Resident Indian (RI) FDs in that the interest rate you earn on it is the same offered to RI investors. Moreover, like RI FDs, the NRO FD investment for NRIs in India is also taxable, i.e., you have to pay the applicable taxes per your tax bracket on the interest income.

  • FCNR Fixed Deposits

    If you wish to open an NRI fixed deposit in a foreign currency, you have that option too. You can just as easily open a Foreign-Currency Non-Resident or FCNR Deposit. Most banks allow you to create this FD in any foreign currency, with tenures lasting from one to five years. Like NRE FDs, the interest on FCNR deposits is also tax-exempt in India. Moreover, currency exchange fluctuations will have no impact on your FCNR deposits.

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NRI Investment In Stock Market

Stocks market investments in India, also known as direct equity, is another investment option you might want to consider as an NRI. However, stock market investments bring with them an element of risk – you could earn significantly higher returns on your capital investment in a bull market, and you could just as easily jeopardise your capital if the market falls. As such, you should consider investing in stocks only if you have the appetite to withstand the risk associated with the investments. Historically, the returns on stock market investments have been higher than those on fixed income securities like NRI fixed deposits.

The prerequisite for NRI investment in stock markets is simple – you can trade stocks through your NRO or NRE account, your Portfolio Investment Scheme or PIS account, or through a DEMAT and trading account from an Indian Depository. Since stock market investments tend to be volatile, you should ensure you do your due diligence, i.e., research about the stocks before investing. Alternatively, you can engage the services of an investment advisor to guide you through your equity investments.

Fixed Deposit Vs Stock Market: What Is The Better Option For NRIs?

If you are torn between choosing NRI fixed deposits and stock market investments, these factors can help you decide.


NRI FD investments are relatively safer as there is no risk on your capital investment amount. Stock market investments are considerably riskier as they are affected by market fluctuations.


Although you can earn fixed returns through your NRI fixed deposits, they can be considerably lower. Conversely, mindful equity investments in the right companies and a stable market can help you earn significantly higher returns.


With NRI fixed deposits, you must stay invested up to your chosen tenure. Premature withdrawal attracts some penalties. On the other hand, you can exit your stock market positions at any time, as there are no fixed tenures attached to the investment.


Whether you opt for NRI investment in the stock market or fixed deposits, it should all depend on three critical factors – your investment goals, your preferred investment tenure, and your ability to withstand risks. While FDs are the ideal investment instruments for conservative investors, you can consider investing in stocks if you have a higher risk appetite.

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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.