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Introduction: 

RFC account scheme was introduced in 1992 which enables a citizen of India or a person of Indian origin who has been resident outside India has become a person resident in India to open an account in foreign currency in India.

Part - A 

Exchange Management Regulations: 

1.  Directions of RBI. 

The account can be opened out of foreign exchange earned as under: 

a.  Pension or any other super annuation or other monitory benefits from his employer outside India  

b.  Realised on conversion of investment in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned when the person was resident outside India  

c.  Received or acquired as gift or inheritance from a person who realized on conversion of investment in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned when the person was resident outside India  

d.  Received or acquired before the eight-day of July 1947 or any income arising or accruing thereon which is held outside India in pursuance of a general or special permission granted by the RBI.

2.  Customer eligibility 

It should be noted that RFC facility is available for any person resident in India.

3.  Type of accounts: 

  Only term deposits can be opened.

4.  Utilisation of funds in RFC: 

a.    The funds in RFC shall be free from all restrictions regarding utilization including any restriction on investment in any form, by whatever name called outside India.  

b.    Withdrawals / payments from such accounts other than for remittance outside India or for payments in foreign currency authorized shall be permitted by the authorized dealer in equivalent Indian rupees.

5.  Nomination facility: 

a.  RFC accounts shall have nomination facility as in the case of resident rupee accounts 

b.  On the death of RFC account holder the balance in the account will be repatriated to the nominees to the extent of his  / her entitlement if on the date of death of the account holder such nominees are resident outside India. To the extent any nominee is a person resident in India on the date of death of the account holder the amount may be paid to him in equivalent Indian rupees.

6.  Loans and overdrafts against the deposits: 

 No loan  / overdraft can be granted by the authorized dealers against the balances held in RFC accounts.

7.  Transfer of balances on becoming non-resident. 

 Funds held in RFC account may freely remitted abroad or credit to fresh NRE / FCNR accounts in the event of the account holder becoming non-resident as per the definition of FEMA 1999.

PART B

Questions and Answers 

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

Yes. Interest in RFC accounts can be paid as per the rate communicated by IBD Chennai to the branches for different currencies and different periods.  

2.  A customer maintains an RFC 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 RFC account of the customer? 

    Yes. The amount can be remitted as there is no restriction in remitting the money out of our country provided the outward remittance is subjected to the regulations of FEMA 1999.  

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 RFC account? 

    No. This is not permitted. Only such of those foreign exchange acquired as per part A paragraph 1 above alone can be credited to RFC account. Please note that this is different from EEFC account and that the exporter may be recommended to keep the amount in EEFC account.  

4. In what currency RFC accounts can be opened? 

RFC account can be opened in any permissible currency