Cogzidel would like to inform its readers about a recent circular from the Reserve Bank of India (RBI). The Circular about Exchange Earner’s Foreign Currency (EEFC) Account (Circular no. 124 dated 10 May) states that, in respect of all future forex earnings, an exchange earner is eligible to retain 50% in non-interest bearing EEFC accounts. The balance 50% shall be surrendered for conversion to rupee balances. Previously, an exchange earner was allowed to retain the entire 100% in EEFC accounts.
Full circular is reproduced below:
A. P. (DIR Series) Circular No. 124
May 10, 2012
AD Category I Authorised Dealer Banks
Exchange Earner’s Foreign Currency (EEFC) Account
“Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to A.P. (DIR Series) Circular No.15 dated November 30, 2006 in terms of which all foreign exchange earners were permitted to retain 100% of their forex earnings in EEFC account with any AD in India.
2. On a review of the Scheme, it has been decided as under :-
a) 50% of the balances in the EEFC accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder. This process may be completed within a fortnight from the date of the circular and compliance reported to the Chief General Manager, Foreign Exchange Department, Central Office, Trade Division, Amar Building, Sir P.M. Road, Fort, Mumbai 400 001
b) In respect of all future forex earnings, an exchange earner is eligible to retain 50% (as against the previous limit of 100%) in non-interest bearing EEFC accounts. The balance 50% shall be surrendered for conversion to rupee balances.
c) The facility of EEFC scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions in future. 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. Accordingly, EEFC account holders henceforth will be permitted to access the forex market for purchasing foreign exchange only after utilising fully the available balances in the EEFC accounts. ADs may, accordingly, obtain a declaration while selling foreign exchange to their constituents.
3. It may be noted that the provisions at paragraph 2(b) and 2(c) above will apply, mutatis mutandis, also to holder of either a Resident Foreign Currency Account (RFC) or a Diamond Dollar Account (DDA).
4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.”
Chief General Manager