FEMA - HENCEFORTH , 50% OF THE EXCHANGE EARNER'S FOREIGN CURRENCY (EEFC) ACCOUNT IS TO BE CONVERTED INTO INDIAN RUPEES

 

Earlier A.P. (DIR Series) Circular No.15 dated November 30, 2006 in terms of which  permitted 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 :- Circular No.RBI/2011-12/547

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).

EEFC conversion requirement: exchange earners must convert part of EEFC balances to rupees and limit foreign currency retention. Regulators mandate that exchange earners convert a prescribed portion of existing EEFC balances into rupees within a short compliance period and report to the Foreign Exchange Department; for future forex receipts, only a reduced share may be retained in non interest bearing EEFC accounts while the remainder must be surrendered for conversion. EEFC balances must be used up before accessing the forex market, authorised dealers may require a declaration, and similar rules apply to Resident Foreign Currency and Diamond Dollar accounts.