Bank Promotion Study

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EEFC Accounts

Exchange Earners Foreign Currency Account ( EEFC)

Exchange Earners Foreign Currency account is an account maintained in foreign currency with an authorized dealer that is a bank which deals in foreign exchange (FOREX). It is a facility provided to the foreign exchange earners which includes exporters also to credit 100% of their foreign exchange earnings to the account. By this account holders do not have to convert foreign exchange into Rupees and vice versa which minimizes the transaction cost.

All categories of foreign exchange earners such as individuals companies who are resident in India, may open EEFC account. EEFC account can be held in the form of a current account. No interest is payable on EEFC account. 100% foreign exchange earnings can be credited to the EEFC account provided that the sum total of the accruals in the account during a calendar month should be converted into Indian Rupees (INR)  on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. Cheque facility is available for operation of EEFC account.

The permissible credits in the EEFC account are:

Inward remittance through normal banking channels, other than remittance received on account of foreign currency loan or investment received from abroad or received for meeting specific obligations by the account holder.

Payment received in foreign exchange by 100% export oriented unit or a unit in export processing zone or software technology park or hardware technology park for supply of goods to such similar unit or to a unit in Domestic Tariff Area (DTA).

Payments received in FOREX by a unit in DTA for supply of goods to a unit in the Special Economic Zone (SEZ).

Payment received by an exporter from an account maintained with an authorized dealer for the purpose of countertrade.

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 credit state in US dollar held in the account of the bank for Foreign Economic Affairs in Moscow (Russia) with an authorized dealer in India.

Professional earnings including directors free, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his Individual capacity.

Re-credit of unutilized foreign currency earlier withdrawn from the account.

Amount representing repayment by the account holder’s importer customer, of loan advance granted, to the exporter holding such account.

The disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADR / GDR under the sponsored ADR/ GDR scheme approved by Foreign Investment Promotion Board (FIPB) of the Government of India.

Permissible debits in EEFC account are:

Payment outside India towards permissible current account transaction in accordance with the provisions of Foreign Exchange Management (Current Account Transactions) Rules, 2000 and permissible Capital Account Transaction in accordance with the Foreign Exchange Management permissible capital account transaction regulations 2000.

Payment in foreign exchange towards cost of goods purchased from a 100% Export Oriented Unit (EOU) or a unit in Export Processing Zone or Software Technology Park or Electronic Hardware Technology Park.

Payment of customs duty in accordance with 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.

Some other important points about EEFC accounts.

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

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

EEFC account holders are permitted to access the forex market for purchasing foreign exchange only after utilizing fully the available balances in the EEFC account.

Accordingly authorized dealers are required to obtain a declaration, while selling foreign exchange to their constituents.

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

Resident individuals have been permitted to include resident close relatives as defined in Companies Act 1956 (amended in 2013) as a joint holder in his EEFC bank account. However they shall not be eligible to operate the account during the lifetime of the resident account holder.

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