An EEFC is an account maintained in foreign currency with a bank dealing in foreign exchange
Exchange earners’ foreign currency account (EEFC) is an account maintained in foreign currency with an authorised dealer i.e. a bank dealing in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100% 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 minimising the transaction costs.
All categories of foreign exchange earners, such as individuals, companies, etc. who are resident in India, can open EEFC accounts. Special economic zone (SEZ) units cannot open EEFC accounts. But, a unit located in an SEZ can open a foreign currency account with an authorised dealer in India subject to certain conditions. SEZ developers can open EEFC Accounts.
An EEFC account can be held only in the form of a current account. Cheque facility is available for operation of the EEFC account. No interest is payable on EEFC accounts.
Up to 100% foreign exchange earnings can be credited to the EEFC account. However, the sum total of the accruals in the account during a calendar month should be converted into rupees before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.
Some of the permissible credits into EEFC 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% export oriented unit;
iii) Payments received in foreign exchange by a unit in the domestic tariff area for supply of goods to a unit in the 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);
v) Advance remittance received by an exporter towards export of goods or services;
vii) Professional earnings including directors fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity;
viii) Re-credit of unused foreign currency earlier withdrawn from the account;
ix) Amount representing repayment by the account holder's importer customer, of loan/advances granted, to the exporter holding such 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.
Foreign exchange earnings received through an international credit card for which reimbursement has been made in foreign exchange may be regarded as a remittance through normal banking channel and the same can be credited to the EEFC account. There is no restriction on withdrawal in rupees of funds held in an EEFC account. However, the amount withdrawn in rupees will not be eligible for conversion into foreign currency and for re-credit to the account.
Source: Reserve Bank of India