Update:
(i) A person resident in India may open with, an AD Category – I bank in India, an account in foreign currency called the Exchange Earners’ Foreign Currency (EEFC) Account, in terms of Regulation 4 of the Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations, 2000 notified under Notification No. FEMA 10/2000-RB dated May 3, 2000 as amended from time to time.
(ii) Resident individuals are permitted to include resident close relative(s) as defined in the Companies Act 1956 as a joint holder(s) in their EEFC bank accounts on former or survivor basis. However, such resident Indian close relative, being made eligible to become joint account holder, shall not be eligible to operate the account during the life time of the resident account holder
(iii) This account shall be maintained only in the form of non-interest bearing current account. No credit facilities, either fund-based or non-fund based, shall be permitted against the security of balances held in EEFC accounts by the AD Category – I banks.
(iv) All categories of foreign exchange earners are allowed to credit 100% of their foreign exchange earnings to their EEFC Accounts subject to the condition that
a) The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. Further, in case of requirements, EEFC account holders are permitted to access the forex market for purchasing foreign exchange.
b) The facility of EEFC scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions. This facility is not intended to enable exchange earners to maintain assets in foreign currency, as India is still not fully convertible on Capital Account.
It may be noted that the provisions at paragraph (iv) a) and (iv) b) above will apply, mutatis mutandis, also to holder of either a Resident Foreign Currency Account (Domestic) or a Diamond Dollar Account (DDA).
(v) The eligible credits represent –
• a) inward remittance received through normal banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder.
• b) Payments received in foreign exchange by a unit in Domestic Tariff Area (DTA) for supplying goods to a unit in Special Economic Zone out of its foreign currency account.
(vi) AD Category – I banks may permit their exporter constituents to extend trade related loans / advances to overseas importers out of their EEFC balances without any ceiling subject to compliance of provisions of Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time.
(vii) AD Category – I banks may permit exporters to repay packing credit advances whether availed in Rupee or in foreign currency from balances in their EEFC account and / or Rupee resources to the extent exports have actually taken place.
The information provided here is part of Export import business Course online
What is an EEFC account?
Payments received in foreign exchange by units under Export Oriented Units, Export Processing Zones units, Special economic zones,Software Technology Park,and Electronic Hardware Technology Parks against supply of goods or services to a foreign country in Domestic Tariff Area is credited to EEFC account opened with the authorized dealer bank. Such amount is credited in foreign currency which can be transferred to domestic currency as and when the account holder wishes to transfer.
What is the purpose of an EEFC account by exporter? Is there any advantages of opening an EEFC account? How to utilize EEFC account by exporter effectively?
An exporter can utilize EEFC account amount of foreign currency to remit trade related loans or advances to overseas customers or overseas buyers. If the exporter needs to pay amount in foreign currency to any of his business needs, he can transfer such foreign currency amount out of EEFC account. Exporter can repay Packing credit loans availed from his bank by transferring his EEFC account either in local currency or in foreign currency which ever is required.
Can an exporter pay ocean freight from EEFC account?
If shipping carrier accepts freight amount in foreign currency , exporter can pay such ocean freight in foreign currency out of EEFC account.
How does EEFC account protect exporters in variation of exchange rate?
Exporters have choice to transfer his foreign exchange amount to EEFC account without converting to local currency, if major fluctuation in exchange rates occurs frequently. Exporter can transfer such EEFC amount as and when he needs to transfer to local currency by availing exchange rate benefit of transferring day’s rate.
Can a foreigner open EEFC account in India?
No, Exchange Earners Foreign currency account can be opened by an Indian Exporter only.
Is Credit facility is permitted on EEFC account?
No credit facility is permitted on EEFC account.
Can EEFC account be opened as savings account?
No, EEFC account can be opened as current account only
Normally EEFC account is opened by whom?
EEFC account is opened by Export Oriented Units, Export Processing Zones units, Special economic zones,Software Technology Park,and Electronic Hardware Technology Parks.
Also read How does exchange rate fluctuations reflect in Export import Business
The above information is a part of Online international business guide course
According to RBI undre FEMA regulations, EEFC account is explained as below:
A.6 Exchange Earners’ Foreign Currency Account (EEFC Account)
(i) A person resident in India may open with, an AD Category – I bank in India, an account in foreign currency called the Exchange Earners’ Foreign Currency (EEFC) Account, in terms of 12Regulation 4 (D) of Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations, 2015 dated January 21, 2016.
(ii) Resident individuals are permitted to include resident close relative(s) as defined in the Companies Act 2013 as a joint holder(s) in their EEFC bank accounts on former or survivor basis.
(iii) This account shall be maintained only in the form of non-interest bearing current account. No credit facilities, either fund-based or non-fund based, shall be permitted against the security of balances held in EEFC accounts by the AD Category – I banks.
(iv) All categories of foreign exchange earners are allowed to credit 100% of their foreign exchange earnings to their EEFC Accounts subject to the condition that
a) The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.
b) The facility of EEFC scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions. This facility is not intended to enable exchange earners to maintain assets in foreign currency, as India is still not fully convertible on Capital Account.
(v) The eligible credits represent –
a) inward remittance received through normal banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder.
b) payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in Export Processing Zone, Software Technology Park or Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area and also payments received in foreign exchange by a unit in Domestic Tariff Area for supply of goods to a unit in Special Economic Zone (SEZ);
(vi) AD Category – I banks may permit their exporter constituents to extend trade related loans/ advances to overseas importers out of their EEFC balances without any ceiling subject to compliance of provisions of Notification No. FEMA 3/2000-RB dated May 3, 2000 as amended from time to time.
(vii) AD Category – I banks may permit exporters to repay packing credit advances whether availed in Rupee or in foreign currency from balances in their EEFC account and / or Rupee resources to the extent exports have actually taken place.
(viii) Where a part of the export proceeds are credited to an EEFC account, the export declaration (duplicate) form may be certified as: “Proceeds amounting to …… representing ….. percent of the export realization credited to the EEFC account maintained by the exporter with……”
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