Personal Website of R.Kannan
Learning Circle- Exchange Control - Exchange
Earner’s Foreign Currency
Account (EEFC)

1. A 100 per cent Export Oriented Unit or a Unit in (a) Export processing zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park may credit up to 70 per cent, and any other person resident in India may credit up to 50 per cent of the following, to the EEFC Account, namely-

   1. inward remittance 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 by the account holder.

   2. payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area.

   3. payment received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade, in accordance with the approval granted in terms of Regulation 14 of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000;

   4. advance remittance received by an exporter towards export of goods or services;

   5. 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;

Provided that the Reserve Bank may, on an application made to it and on being satisfied that it is necessary to do so, grant permission to hold higher percentage of inward remittance/payments in foreign exchange in the EEFC account.

2. Except to the extent provided in sub-paragraph (1), no payment received in foreign exchange by the accountholder from any other person resident in India, shall be credited to an EEFC account.

Explanation:
For the purpose of the sub-paragraph (1), payment received through an international credit card for which reimbursement will be provided in foreign exchange may be regarded as a remittance through normal banking channels.

Following credits may be made to an EEFC Account, namely –

1. A portion of inward remittance/payment received by the recipient in foreign exchange subject to the provisions of paragraph (1);

2. Interest earned on the funds held in the account;

3. Recredit of unutilised foreign currency earlier withdrawn from the account;

4. Amount representing repayment by the account holder’s importer customer, of loan/advances granted in terms of clause (iv) of Paragraph 3.

Following debits may be made to an EEFC Account, namely –

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

2. Payment in foreign exchange towards cost of goods purchased from a 100 percent Export Oriented Unit or a Unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology park.

3. Payment of customs duty in accordance with the provisions of Export Import Policy of Central Government for the time being in force.

4. Trade related loans/advances, not exceeding US $ 3 million, 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, 200

5. Payment in foreign exchange to a person resident in India for supply of goods/services including payments for air fare and hotel expenditure.

1. 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.

2. Authorised dealer may issue cheque books of separate series with the superscription “EEFC Account” to the account holders maintaining such accounts, and also satisfy himself while honouring the cheques that the payment made by the account holder by issue of a cheque is permissible under these Regulations.

Subsequent to the above Notification, as a part of continuous process of rationalisation and simplification of procedures and further liberalisation of the existing regulations relating to exports, the Reserve Bank of India issued two Press Releases as detailed under to announce rationalisation/liberalisation of EEFC Account Scheme.

1. Press Release : 2002-2003/172 dated August 15, 2002 (Government of India Notification No. FEMA.69/2002-RB dated August 26, 2002 [G.S.R.755(E) dated November 8, 2002]
   The Reserve Bank has permitted individual professionals to keep up to 100 per cent of their foreign exchange earnings from consultancy and other services rendered to persons or bodies outside India, in their foreign exchange earners’ foreign currency (EEFC) account. The facility has been permitted for the benefit and convenience of individual professionals, lawyers, doctors, artists, architects, engineers, consultants, cost/chartered accountants, directors on boards of overseas companies, etc.

2. Press Release : 2002-2003/265 dated September 6, 2 (Government of india Notification No. No.FEMA.92/2003-RB dated June 7, 2003 [G.S.R.11(E) dated January 7, 2004]
   As a further measure towards giving boost to the export oriented units and rationalisation of the EEFC Account Scheme, it was decided that there would only be two categories of EEFC Account holders. One, those who can retain upto 100 per cent of their receipt in foreign exchange and others who can retain upto 50 per cent of their receipt in foreign exchange. Accordingly, a 100 per cent Export Oriented Unit (EOU) or a unit situated in (a) Export Processing Zone (EPZ) or (b) Software Technology Park (STP) or (c) Electronic Hardware Technology Park (EFTP), are eligible to credit upto 100 per cent of their foreign exchange receipts to their EEFC Account, against the existing eligibility of credit upto 70 per cent.

1. EEFC account can be maintained in any convertible foreign currency and in any form i.e., current, savings or term deposit accounts. However, saving bank accounts is permitted only in the names of individuals Savings bank accounts, however, cannot be maintained in the names of firms, companies, etc. No interest is payable on the balances held in the form of current account. ii. Savings account or Term deposit account – The rate of interest payable on the balances in savings/term deposit accounts will be determined by the banks taking into account the interest rates prevailing in the international markets. Authorised Dealers maintaining these accounts may prescribe a suitable minimum balance for these accounts.

2. Exporters with large turnover, who are permitted to open foreign currency accounts abroad by Reserve Bank are not eligible to open EEFC accounts.

3. Remittances received from abroad towards investment in equity shares, bonds, debentures etc. as also for purchase of immovable property in India are not eligible for the purpose of credit to EEFC accounts of the beneficiaries.

4. The resident beneficiaries of the payments received in foreign exchange from the EEFC account holders are required to surrender the foreign exchange within seven days of its receipt to an authorised dealer. The resident beneficiaries of foreign exchange in such cases will not be eligible for EEFC facility.

5. EEFC balances cannot be sold / transferred to accounts of other residents.

6. Credit facilities, fund based as well as non-fund based, is permitted against the security of funds held in the EEFC accounts but is subject to the commercial judgement of the Authorised Dealer. It has further been stated that the credit facilities against the security of balances in EEFC Accounts may be granted in foreign exchange also. The repayments of such credit facilities should, however, be made out of balances in EEFC Accounts of the concerned depositors. The facilities should be utilised for normal business purposes only and not for any on-lending or for investment in shares, securities, etc.

7. Exporters who have obtained any export credit from a bank against shipment in respect of which a percentage of the proceeds is sought to be credited to the EEFC account, the export credit has to be liquidated fully before affording any credit out of the export proceeds to the EEFC accounts.

8. Balances in the EEFC accounts are allowed to be sold forward by the account holders provided they remain earmarked for delivery. Such contracts should not, however, be cancelled.