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What is EEFC Account and Its Advantage

Updated: Jan 4


What is EEFC Account?

Exchange Earners Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer Bank to deal in foreign exchange. This facility is provided to foreign exchange earners (including exporters). EEFC Account allows to keep 100% of foreign exchange earnings in forex in the account, eliminating the need of converting foreign currency into home/ domestic currency which minimize the transaction cost for foreign exchange earner. No interest is paid on EEFC Accounts to the account holder.


EEFC offers various benefits such as :

1. Retaining foreign currency

2. Converting it as per choice at a later date, online conversion,

3. Wide range of currencies,

4. Outward Foreign remittance can be made directly in foreign currency and

5. EEFC Account balances can also be hedged, however the account sold forward have to be earmarked by the account holder for delivery.


In an EEFC Account, the account holder can deposit the foreign currency, hold and maintain foreign currency, make forex transactions such as import payments, convert foreign currency into domestic currency. However, it is to be kept in mind that funds can only be utilized for specific purposes such as imports, foreign travel expenses as specified by Reserve Bank of India. Along with that all the guidelines need to be followed and compliances needs to be met for proper utilization of EEFC Account.


A foreign exchange earner including individuals, companies, etc who are resident in India may open and operate an EEFC Account with bank subject to certain terms and conditions specified by RBI from time to time. Unit located in Special Economic Zone can open an account with authorised dealer in India, however SEZ Units cannot open EEFC Accounts.


Exchange Earners' Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer Category - I bank i.e. a bank authorized to deal in foreign exchange.


What are the permissible credits or permissible receipts into this account?

i) Inward remittance through normal banking channels, other than remittances received on account of foreign currency loan or investment received from abroad or received for meeting specific obligations by the account holder;


ii) 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 units or to a unit in Domestic Tariff Area;


iii) Payments received in foreign exchange by a unit in the Domestic Tariff Area for supply of goods to a unit in the Special Economic Zone (SEZ);


iv) Payment received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade. (Counter trade is an arrangement involving adjustment of value of goods imported into India against value of goods exported from India in terms of the Reserve Bank guidelines);


v) Advance remittance received by an exporter towards export of goods or services;


vi) 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;


vii) Professional earnings including directors’ fee, consultancy fee, lecture fee, honorarium and similar other earnings received by a professional by rendering services in his individual capacity;


viii) Re-credit of unutilised foreign currency earlier withdrawn from the account;


ix) Amount representing repayment by the account holder's importer customer in respect of trade related loan/advances granted by the exporter (subject to compliance with the extant guidelines) holding EEFC account; and


x) The disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/GDRs under the Sponsored ADR/GDR Scheme approved by the Foreign Investment Promotion Board of the Government of India.


What are the permissible debits or permissible payments into EEFC account?

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


ii) 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


iii) Payment of customs duty in accordance with the provisions of the Foreign Trade Policy of the Central Government for the time being in force.


iv) Trade related loans/advances, extended 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, 2000.


v) Payment in foreign exchange to a person resident in India for supply of goods/services including payments for airfare and hotel expenditure.


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.


EEFC Account can be beneficial for those who earn in foreign currency provided careful consideration and due diligence is performed while dealing in foreign exchange.

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