EXCHANGE EARNERS FOREIGN CURRENCY ACCOUNT

[DR.MARIAPPAN GOVINDARAJAN]

Foreign currency account

The expression ‘Foreign currency account’ is defined under Regulation 2(iii) of the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015 (‘Regulation’ for short). 

Regulations for foreign currency account

Regulation 4 provides that a person resident in India may open, hold and maintain with an authorised dealer in India, a Foreign Currency Account to be known as Exchange Earners’ Foreign Currency (‘EEFC’ for short) Account, subject to the terms and conditions of the Exchange Earners' Foreign Currency Account Scheme.  The scheme is available in the Schedule I of the Regulations.  Individuals, companies etc., who are resident in India may open this account. 

Joint holders of EEFC Account

The Resident individuals are permitted to include resident relative(s) as a joint holder(s) in their EEFC account on ‘former or survivor’ basis.   Such resident Indian relative(s) shall not be eligible to operate the account during the life time of the resident account holder.

Authorized dealer

This account is dealt in foreign currency.  These accounts are maintained by Authorized Dealer – Category I banks. A Special Economic Zone cannot open this account but the unit in the Special Economic Zone can open this account.   

Nature of Account

This account is only in the form of current account.  No interest is eligible for the credits available in this account. 

Credit

In these accounts a facility is provided to the foreign exchange earners, including exporters, to credit 100 % of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs. 

Permissible credits

The following credits may be made to an EEFC account-

• Inward remittance through normal banking channels, other than remittances received on account of foreign currency loan or investment received from abroad or received for meeting specific obligations by the account holder;
• Payments received in foreign exchange by a 100%  Export Oriented Unit or a unit in-

• Export Processing Zone; or
• Software Technology Park; 0or
• Electronic Hardware Technology Park for supply of goods to similar such units or to a unit in Domestic Tariff Area;

• Payments received in foreign exchange by a unit in the Domestic Tariff Area for supply of goods to a unit in the Special Economic Zone;
•  Payment received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade; (Counter trade is an arrangement involving adjustment of value of goods imported into India against value of goods exported from India in terms of the Reserve Bank guidelines);
• Advance remittance received by an exporter towards export of goods or services;
• Payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. Dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorised dealer in India;
• Professional earnings including directors’ fee, consultancy fee, lecture fee, honorarium and similar other earnings received by a professional by rendering services in his individual capacity;
• Re-credit of unutilised foreign currency earlier withdrawn from the account;
• Amount representing repayment by the account holder's importer customer in respect of trade related loan/advances granted by the exporter (subject to compliance with the extant guidelines) holding EEFC account; and
• The disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/GDRs under the Sponsored ADR/GDR Scheme approved by the Foreign Investment Promotion Board of the Government of India.

Foreign exchange earnings received through an international credit card for which reimbursement has been made in foreign exchange may be regarded as remittance through normal banking channel and the same can be credited to the EEFC account.

Permissible debits

The following debits may be made to an EEFC account-

•  Payment outside India towards-

• a permissible current account transaction in accordance with the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000; and
• a permissible capital account transaction in accordance with the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000;

• Payment in foreign exchange towards cost of goods purchased from-

• a 100% Export Oriented Unit; or
• a Unit in Export Processing Zone; or
• a unit in Software Technology Park; or
• a unit in Electronic Hardware Technology Park;

• Payment of customs duty in accordance with the provisions of the Foreign Trade Policy of the Central Government for the time being in force;
• Trade related loans/advances, extended by an exporter holding such account to his importer customer outside India, subject to compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000;
• Payment in foreign exchange to a person resident in India for supply of goods/services including payments for airfare and hotel expenditure.

Withdrawal

There is no restriction on withdrawal in Rupees of funds held in an EEFC account. However, the amount withdrawn in Rupees shall not be eligible for conversion into foreign currency and for re-credit to the account.

Exchange Risk

The EEFC account balances can be hedged. The balances in the account sold forward by the account holders have to remain earmarked for delivery. However, the contracts can be rolled over.

Cheque book

The Authorised dealer may issue cheque books of separate series with the superscription "EEFC Account" to the account holders maintaining such accounts.  It is to be satisfied that the payment made by the account holder by issue of a cheque is permissible under these Regulations.

Reference:

1. https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=11.