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EXCHANGE EARNER'S FOREIGN CURRENCY ACCOUNTS (EEFC)

Introduction:

 EEFC account scheme was introduced in 1992, which enabled exporters and other exchange earners to retain a portion of the receipts with the authorized dealer in India. Such accounts can be maintained in non-interest bearing current accounts only.

Part - A 

Exchange Management Regulations

1.  Directions of RBI. 

The general rule is that inward remittances received from abroad should be converted into Indian rupees, and the rupee amounts so arrived at should be paid to the beneficiaries resident in India. As an exception to this general rule, under the EEFC scheme introduced by RBI, exporters and other exchange earners if they so desire may retain a portion of the receipts in foreign exchange with an authorized dealer in India. At present a 100% Export Oriented Unit (EOU) or a unit in (i) Export Processing Zone (EPZ) and (ii) Software Technology park (STP) and (iii) Electronic Hardware Technology Park (EHTP) may credit up to 70% and any other person resident in India up to 50% of the inward remittances to the EEFC account.

2.  Customer eligibility.

It should be noted that EEFC facility is available not only for exporters of goods and services but also for any person resident in India who is receiving remittances from abroad in a freely convertible currency.

3.  Eligible inward remittances.

a.  EEFC facility is also available for advance remittances received by exporters in a freely convertible currency.

b.  Foreign tourists who are on a visit to India are making payments to hotels in India by presenting International Credit Cards issued outside India in their favour. The hotels in turn obtain reimbursement in rupees from the Credit Card Servicing Organisations in India. The hotels are permitted to keep up to 50% of the amounts received by them in EEFC accounts, provided a certificate is issued by the Credit Card Servicing Organisations in India stating that they have realised the corresponding payments in a convertible currency in an approved manner.

4.  Ineligible Inward Remittances.

The following categories of inward remittances are not eligible for EEFC facility:

a.  remittances received from abroad persuant to undertakings given by the beneficiaries to the authorities concerned in India.

b.  remittances received from abroad for meeting specific obligations

c.  remittances received towards investments in equity shares, bonds or debentures and also for purchase of immovable property in India.

5.  Terms and conditions of EEFC account

a.  EEFC accounts may be held in the form of current accounts only.

b.  Authorised dealers have been permitted to provide cheque book facility to the EEFC account holders.

c.  No interest shall be paid on the balances held in current accounts.

d.  Balances held in EEFC accounts shall be utilised by the account holders only. These balances cannot be transferred to any other party in India.

e.  Sometimes the exporter would have taken export credit from the authorised dealers against the shipment made by him. The exporter is allowed to avail of the EEFC facility only after the export credit is liquidated in full.

f.  Authorised dealers in foreign exchange are not permitted to grant fund-based or non-fund based credit facility to account holders against the balances held in their EEFC accounts.

g.  Funds held in EEFC accounts may be utilised for making remittances to foreign countries for all the transactions, which are normally allowed under the prevailing exchange management regulations. In other words, in the case of outward remittances of an eligible nature, funds held in EEFC accounts may be utilised for making the payments instead of purchasing the foreign exchange from an authorised dealer at the ongoing market exchange rates. Such “funds utilisation facility” is available for actual accountholder only, and not for any other third party including associate concerns, firms or group companies.

h.  Funds held in EEFC accounts may also be allowed to be utilised for payment of air fare and hotel expenditure abroad in connection with visits abroad of the employees / Propreitors/ Partners / directors of the account holder.

i.  Payments to residents in India are sometimes made in consideration of supply of goods/services including payments for air fare and hotel expenditure: The resident beneficiaries have been given general permission by RBI to accept payments in foreign exchange by way of remuneration for services rendered or goods sold in India when such payment is made by a resident in India by withdrawal from his EEFC account. The foreign exchange acquired in the above manner by resident beneficiaries must be surrendered to an authorised dealer in foreign exchange in India within 7 days. The resident beneficiaries in such case are not eligible for EEFC facility in such cases.

PART B 

Questions and Answers 

1.  A customer is maintaining an EEFC account with our bank in the form of current account. He has requested the branch to pay interest to him on the balances held in the EEFC account. The branch states that large amounts are being held by the customer in his EEFC account. What can be done?

Exchange Management regulations are clear and specific on this subject. The regulations state that no interest should be allowed by authorised dealers on the balances held in current accounts. We may express our inability to accede to the request of the customer.

2.  A customer maintains an EEFC account. He desires to make a remittance to a foreign country on behalf of his “associate concern”. Can we allow the remittance from out of the funds held in the EEFC account of the customer?

EEFC funds can be utilised for approved purposes by the actual accountholder only and not by any other party like associate concern, associate firm, group company etc. We may politely turn down the request of the customer and bring to his knowledge the provisions of exchange management regulations.  

3.  An exporter is receiving advance remittance from the overseas buyers frequently. He wants to know whether a portion of these inward remittances may be held in EEFC account?

YES. This is permitted. A clarification given by RBI states that advance remittances received by exporters in a freely convertible currency are eligible for EEFC facility. The only condition is that, in case the shipment does not take place and the advance payment is desired to be refunded to the overseas buyer, then the funds already credited to EEFC account must first be utilised for the purpose of making the refund.

4.  A customer purchased currency notes and traveller’s cheques from our bank by withdrawing funds from his EEFC account before his departure from India on a business visit abroad. On his return to India he has brought with him some unutilised traveller’s cheques and currency notes. These unutilised instruments are surrendered to our bank with a request that the amount may be recredited to his EEFC account. Can we accede to his request?

Yes. This is permitted.