Understand Exchange Earners Foreign Currency (EEFC) Account

Understand Exchange Earners Foreign Currency (EEFC) Account
Finance

Understand Exchange Earners Foreign Currency (EEFC) Account

Registrationwala

The full form of EEFC Account is Exchange Earners Foreign Currency Account. It is a type of bank account. This account is a non-interest bearing current account operated by a foreign exchange earner. If you want to know what an EEFC account is, who can open it, required documents for opening it and more, check out this article.

What is an EEFC Account?

An Exchange Earners Foreign Currency (EEFC) Account is a bank account offered in India for foreign exchange earners, enabling them to hold their foreign earnings in their original currency without immediately converting them to Indian Rupees (INR). The foreign exchange earners are individuals or businesses that are based in India but are earning money from abroad. 

An EEFC account is open to companies, individuals and joint account holders. It is a non-interest bearing account. This means that no interest is paid on the funds in this account. Many Indian banks offer the EEFC bank account opening facility for specific currencies. If you get foreign income in one of the specific currencies, it can stay in that currency while being deposited into an Indian bank account. 

A foreign exchange earner can have more than one currency in an EEFC account. They may decide if they want to keep their funds in the foreign currency for a specific amount of time or convert it into rupees. The rupees cannot be converted back into the original currency and redeposited into the account once they have been taken out. One significant disclaimer is that on the final working day of the succeeding calendar month, the entire balance in the account gets changed to rupees. 

EEFC accounts are governed by the Foreign Exchange Management Act, 1999. This Act was amended in May 2000 to allow “opening, holding, and maintaining” Foreign Currency Accounts in India.

Who can Open an EEFC Account?

All categories of foreign exchange earners, such as individuals, companies, and HUFs, who are resident in India, may open such accounts as long as they meet the following eligibility criteria:

List of Currencies for which EEFC Account can be Opened

The currencies for which an EEFC account can be opened depend on the bank you open such an account with. Generally, banks in India allow EEFC account-opening in following currencies:

Documents Required for Opening EEFC Account

The following documents are typically required for opening this account with a bank:

Depending on the exact bank, some additional documents may be required. For the exact list of documents, you can connect with the bank you want to open an EEFC account with. 

Benefits of EEFC Account

Opening such an account provides the following benefits to foreign exchange earners:

How to Open EEFC Account?

To open Exchange Earners Foreign Currency account for your business, follow these steps:

Step 1: Select a Bank Based on Certain Factors

Choose a bank account that allows you to open an EEFC account. Many banks in India offer this facility. Before deciding which bank to open an account with, consider factors such as the bank's reputation in the market, services and proximity to your business location. 

Step 2: Fill Out Application Form

After choosing the bank, fill out the application form for opening an Exchange Earners Foreign Currency account. Make sure all the information you provide in the form is correct and sign all the necessary pages. 

Step 3: Submit Relevant Documents

Submit the documents required to open an exchange earners account. This includes submission of documents, such as Certificate of Incorporation, Memorandum of Association, Articles of Association, PAN (Permanent Account Number) of the business, KYC (Know Your Customer) documents for authorized signatories. 

For a company, board resolution is required for authorizing account opening and specifying the foreign currency account signatories. If you are an exporter, you will need Import Export Code issued by the Directorate General of Foreign Trade.‍

Step 4: Approval by Bank

After submitting the application with all the required documents, the bank will carefully evaluate all the details. Upon approval, they will furnish details about your new foreign currency account, including the account number.

Step 5: Initial Deposit into the Account

Once your EEFC account is ready, you must make an initial deposit into it. The minimum deposit requirement varies from bank to bank. 

Step 6: Start Using the Account for Transactions

Once the account becomes active, you can use it for transactions involving forex earnings. As per the permissible usage outlined by the RBI, you can hold/transact in international currencies.

Permissible Credits in an EEFC 

Permissible credits into such an account include:

Permissible Debits in an EEFC 

The following are the permissible debits under this account:

Exchange Earners Foreign Currency Account’s Limitations

Here are some limitations of an exchange earners foreign currency account. You must understand all these limitations carefully before opening such an account:

Make sure you consider all these limitations carefully so you can make the right decision.

List of Banks offering EEFC Facility

Here are some popular banks that allow customers to open international currency accounts:

What are EEFC Charges?

Generally, banks do not charge opening and maintenance charges for opening such an account. However, there are certain other charges that banks may levy on various types of activities linked to accounts.

For complete information about the fees/charges for an exchange earners foreign currency account, you may talk to your bank. Doing so will help you understand all the potential costs related to this account and help you avoid any surprises.

Conclusion

If you run a business dealing in foreign currency transactions, you can consider opening an EEFC account. It is a non-interest bearing current account and is exclusively meant for foreign exchange earners. This account will help you to minimize currency conversions, encourage financial management and make vendor payments easier. Before opening an account, make sure you carefully consider factors, such as choosing the right bank, compliance with FEMA regulations, etc. 

If you want to start a money exchange business, connect with Registrationwala for assistance in obtaining FFMC license from the Reserve Bank of India (RBI).

Frequently Asked Questions (FAQs)

Q1. What types of businesses can open an EEFC account?

A. Generally, businesses engaged in export, providing services abroad or generating income through other legal foreign exchange channels are eligible to open this account.

Q2. Can I hold multiple international currencies in an EEFC account?

A. Yes, you can generally hold multiple international currencies in this account. You may connect with your bank to know their exact terms and conditions.

Q3. Is it possible for corporations and Indian citizens to have foreign exchange accounts outside of India?

A. Yes, it is possible. Individuals, including independent contractors, can open and maintain foreign currency accounts abroad subject to regulations set forth by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA). 

Q4. Which Act governs the EEFC accounts in India?

A. Foreign Exchange Management Act 1999 governs the EEFC accounts in India.

Q5. How to close an EEFC account?

A. To close an EEFC account, you must withdraw the entire amount from your bank account. Afterward, you must submit the account closure form to the bank branch. You might need to submit some additional documents along with the form. 

Q6. Can you earn interest in an Exchange Earner's Foreign Currency account?

A. No, you cannot earn interest in an Exchange Earner's Foreign Currency account. 

 

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