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Home>> Publications >> Exchange Control Manual Category >> Exchange Control Manual - Exchange Control Manual View
 
Date : 31 May 2005
EEFC accounts
Part D(ch.14)

PART D - EXCHANGE EARNERS FOREIGN CURRENCY (EEFC) ACCOUNTS

General

 

14D.1

(i)

Reserve Bank, by its Notification No.F.E.R.A. 183/98-RB dated 22nd April, has

Note: Unspent foreign exchange surrendered out of the foreign exchange obtained for travel abroad may be re-credited to EEFC account, provided the foreign exchange was released by debit to the same EEFC account .

permitted exporters of goods and services and other beneficiaries of inward remittances in convertible foreign currency, other than those remittances received pursuant to undertakings given by them or those received for meeting specific obligations, to open and maintain with authorised dealers in India accounts expressed in foreign currency and titled 'Exchange Earners Foreign Currency (EEFC) Accounts' and to credit to such accounts amounts not exceeding 50% of such remittances and operate on such accounts. In the case of 100% Export Oriented Units or units located in Export Processing Zones or in Software Technology Parks or in Electronic Hardware Technology Parks, amounts up to 70% of the remittances can be credited to such accounts. Authorised dealers may also allow credits to EEFC accounts in the following cases:

 
 

a)

Up to 50%/70% of the inward remittances, as the case may be, received towards export advance in freely convertible currencies subject to monitoring of the advances received by the authorised dealers concerned in terms of paragraph 6C.6.

     
 

b)

Up to 50% of the payments received by exporters by debit to U.S.Dollar Escrow accounts maintained in India as also under the foreign currency debt repayment route, towards value of goods exported by them.

     
 

c)

Up to 50% of the payments received by hotels from Credit Card Servicing Organisations (CCSO) in India in rupees against goods/services sold/supplied to foreign tourists against international credit cards issued abroad, provided CCSO in India confirms that the total bill amount as per charge slips received by the hotels has been realised in convertible foreign currency in an approved manner. In such cases foreign exchange equivalent of the 50% of the amount received in rupees may be credited to their EEFC accounts by converting at the market rate.

     
     

(ii)  The resident beneficiaries of the payments received in foreign exchange from the EEFC account holders in accordance with Notification No.F.E.R.A.186/98-RB dated 4th September 1998 issued by Reserve Bank will be required to surrender the foreign exchange within seven days of its receipt to an authorised dealer as per the existing regulations. The resident beneficiaries of foreign exchange in such cases will not be eligible for EEFC facility.


EEFC Accounts not permitted in certain cases

14D.2 (i) Exporters maintaining foreign currency accounts in terms of paragraph 6A.12 are not eligible to maintain EEFC accounts.

14D.2(ii) Authorised dealers may maintain EEFC account in any convertible foreign currency and in any form (current, savings or term deposit accounts). Savings bank accounts in the names of firms, companies, etc. should, however, not be permitted.

 

Minimum balance

 

14D.3

Authorised dealers maintaining EEFC accounts may prescribe a suitable minimum balance

for these accounts.

 

Utilisation of Funds for Approved Purposes only

 
14D.4 (i) Authorised dealers may allow utilisation of funds held in EEFC accounts for making all bonafide payments of the account holders in foreign exchange connected with their trade and business related transactions which are of a current account nature (besides certain permitted capital account transactions) without any restrictions except in the case of remittance of agency commission. In other words such business/trade related remittances may be allowed by authorised dealers beyond the monetary or percentage ceiling if any, prescribed in ECM, except that where rate of agency commission on export exceeds 12.5% of invoice value prior approval of Reserve Bank should be obtained.
 

14D.4

(i)

The funds held in EEFC accounts may be permitted to be utilised by the account

holder for all bona fide payments of the account holder subject to the limits and conditions and on verification of documents prescribed in the Manual and/or against permits issued by Reserve Bank. Authorised dealers may also permit utilisation of the funds held in EEFC accounts for making bona fide payments of the account holders in foreign exchange connected with their trade and business related transactions which are of a current account nature (i.e. other than for capital account transactions viz. for investments abroad or for repayment of loans, etc.), without any restriction except in the case of remittance of agency commission on exports. In other words such business/trade related remittances may be allowed by authorised dealers beyond the monetary or percentage ceilings, if any, prescribed in the Manual or for similar other purposes not expressly stated therein but where the rate of agency commission on exports exceeds 12.5 per cent (cf. paragraph 6E.2) prior approval of Reserve Bank should be obtained. Before allowing such remittances authorised dealers should satisy themselves about the bona fides of the transaction with reference to the documentary evidence produced by the account holder. Doubtful cases should, however, be referred to Reserve Bank with full details together with comments of the authorised dealer.

 
 

(ii)

Funds held in EEFC accounts may also be allowed to be used for the purposes

listed in Annexure I.

 

NOTE: 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/directors etc. of the account holder.

Reserve Requirements

14D.5 The balances in the EEFC accounts will be subject to Cash Reserve Ratio and Statutory Liquidity Ratio as prescribed by Reserve Bank from time to time.

 

Rate of Interest

 

14D.6

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 international markets. No interest is payable on the balances held in the form of current accounts.

 

Transfer to Other Accounts

 

14D.7

Funds held in the EEFC accounts will not be permitted to be sold/transferred to accounts

of other residents in India. However, authorised dealers may permit, on application, transfer of funds from the EEFC account/s of the Indian tour operator/s to EEFC accounts of hotels and other establishment/s provided the tour operator confirms that the amount represents the proportionate share of the latter in relation to the services rendered to foreign tourists.

 

Liquidation of Export Credit

 

14D.8

In case the exporter has 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, authorised dealers should ensure that the export credit has been liquidated fully before affording any credit out of export proceeds to the EEFC account.

 

Issue of cheques against EEFC balances

14D.8A i) Authorised dealers may allow EEFC account holders the facility of making payments from such accounts for eligible purposes by issue of cheques to the beneficiaries of the payment. In order to facilitate easy identification of cheques drawn on EEFC accounts, authorised dealers may issue to their constituents maintaining EEFC accounts with them, separate cheque books containing a special series of cheques distinct from cheques issued on domestic rupee accounts and NRE accounts superscribed with the words 'EEFC Account'. Authorised dealers may fix their own requirement of minimum balance in the account for being eligible to avail of cheque facility. While allowing the above facility authorised dealers should advise the EEFC account holders that while issuing cheques for making payments in foreign exchange out of funds held in EEFC accounts, they will ensure that the cheques are issued for payments for approved purposes only and the relevant exchange control regulations are complied with.

ii) EEFC account holders should immediately after issue of the cheque, but in any case not later than seven days, submit an application to authorised dealer on form A1 or A2, as the case may be, together with supporting documents giving full particulars of transaction for which cheque was issued.

iii) While making payment of cheques issued on EEFC account, authorised dealers should satisfy themselves that the transaction in question is permissible under the current exchange control regulations. Any payment made by issue of a cheque for a purpose for which use of funds held in EEFC account is not permissible should be reported to Reserve Bank promptly.

iv) The transaction should be reported in appropriate 'R' return when the cheque is cleared for payment.

 

Facilities against the Security of Deposits

 

14D.9

Credit facilities whether fund based or non fund based, in rupees or in foreign exchange, may be granted either in India or abroad, against the security of funds held in the EEFC accounts. The repayment of such credit facilities should be made out of the balance in the EEFC account of the concerned depositor. The facility should be used for normal business purposes only and not for any on-lending or for investment in shares, securities, etc.

 
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