What is an Exchange Earners’ Foreign Currency account?
Individuals and businesses engaging in exporting goods and services to foreign countries can open an Exchange Earners’ Foreign Currency (EEFC) account to receive payment in foreign currencies in Indian bank accounts. EEFC accounts are a type of current account and do not carry any interest payable.
For instance, a business engaged in exporting raw material to the United Kingdom can open an EEFC account with a Bank. Their payment is received and stored in that bank account in pounds itself rather than getting converted to INR. If the Indian seller exports to multiple other countries, their EEFC account will be credited and stored with payments in the country-specific currency, provided the country is ALCO approved.
The account holder also can get the remittance converted to INR once deposited or hold it in the currency of origin. However, note that the stored fund automatically gets converted to INR by the end of the monthly cycle. Although there are no restrictions on the amount that can be withdrawn (which is in INR) from these accounts, money cannot be re-converted to another foreign currency once the withdrawal is made.
Who can open an EEFC account?
Individuals and companies residing in India and are foreign exchange-earners can open an EEFC account. Typically these are players from Export Processing Zones units, Export Oriented Units, Software Technology Parks, and Electronic Hardware Technology Parks. However, if they fall under the special economic zone units’ purview, they can not only open an EEFC account.
What are some permissible credits into the EEFC account?
Benefits of opening an EEFC account
For someone regularly conducting business across different countries, it’s prudent to open an EEFC account. An exporter can utilize EEFC account amount of foreign currency to remit trade-related loans or advances to overseas customers or overseas buyers. If the exporter needs to pay an amount in foreign currency for any of his business needs, he can transfer such foreign currency amount out of EEFC account. The exporter can repay Packing credit loans availed from his bank by transferring his EEFC account either in local currency or in foreign currency which ever is required.
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. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs.
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