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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.
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.
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:
The EEFC applicant must be a resident of India. The applicant can be an individual, company, partnership or any other legal business entity that operates within the country.
They must be a foreign exchange earner, such as an exporter, professional earning foreign currency or a business involved in foreign exchange (forex) transactions.
The applicant must adhere to the terms and conditions regarding the EEFC accounts, as outlined by the Central Bank i.e., the Reserve Bank of India, Foreign Exchange Management Act (FEMA) 1999 and the FEMA Regulations 2000.
To undertake foreign trade transactions under EEFC account, the exporters must possess a valid Import Export Code. It is issued online by the Directorate General of Foreign Trade (DGFT) of the Government of India.
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:
United States Dollar(USD)
European Union (EUR)
Great Britain Pound (GBP)
New Zealand Dollar (NZD)
Swedish Kroner (SEK)
Saudi Riyal (SAR)
Hong Kong Dollar (HKD)
Japanese Yen (JPY)
Swiss Franc (CHF)
Singapore Dollar (SGD)
Denmark Krone (DKK)
Korean Won (KRW)
Russian Ruble (RUB)
Chinese Yuan (CNH)
Canadian Dollar (CAD)
Australian Dollar (AUD)
United Arab Emirates Dirham (AED)
Thai Baht (THB)
Kuwaiti Dinar (KWD)
Norwegian Krone (NOK)
South African Rand (ZAR)
The following documents are typically required for opening this account with a bank:
Duly Filled and Signed EEFC Account Opening Form.
Board resolution/partnership letter/proprietorship letter for authorizing the opening of account.
Proof of Status document stating whether the company’s unit is located in Special Economic Zone (SEZ), Software Technology Park (STP), or Electronics and Hardware Technology Park (EHTP).
Duly Stamped Partnership Deed signed by all partners. Additionally, identity proofs of all authorized signatories are also essential.
Hindu Undivided Family (HUF) wanting to open such an account requires a letter signed by Karta and all major coparceners. Photographs of Karta and coparceners will also be required along with Karta’s identity proof and address proof.
No Objection Certificate from the lending bank extending credit facility to the entity (if applicable).
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.
Opening such an account provides the following benefits to foreign exchange earners:
Exchange Earners Foreign Currency account serves as an important tool for customers, including exporters dealing in international trade and forex transactions.
Such an account helps in streamlining financial operations, reduces currency risks and enhances overall efficiency when it comes to foreign earnings’ management.
Individuals, companies, and other foreign exchange earners can open this type of account.
You can park your inward remittances in an Exchange Earners Foreign Currency account in different currencies like USD, EURO, GBP and so on.
You can retain foreign exchange in currency you receive for a certain period of time and reserve your balance to make foreign currency payments later without having to go through the conversion process.
To open Exchange Earners Foreign Currency account for your business, follow these steps:
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.
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.
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.
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.
Once your EEFC account is ready, you must make an initial deposit into it. The minimum deposit requirement varies from bank to bank.
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 into such an account include:
Inward remittances (except foreign currency loans/investments/specific obligations).
Disinvestment proceeds from ADR/GDR conversions.
Export payments from State Credit repayments.
Professional earnings, such as directors' fees, consultancy charges and so on.
Payments received by export-oriented units or units in special economic zones (SEZs) for products that are sold to similar units or domestic tariff areas.
Advance remittances for export activities.
Re-credit of foreign currency that has not been utilized.
Loan repayments related to trade.
The following are the permissible debits under this account:
Payments for current and capital account transactions.
Trade-related loans or advances to importer customers outside India subject to FEMA regulations 2000.
Payments to Indian residents for goods and/or services. This includes airfare and hotel expenses.
Payments related to the export-oriented units or units in special economic zones (SEZs) for the products purchased.
Customs duty payments in accordance with the Foreign Trade Policy.
Here are some limitations of an exchange earners foreign currency account. You must understand all these limitations carefully before opening such an account:
An Exchange Earners Foreign currency account can get money from different nations. However, it cannot accept the money in the form of a foreign loan/investment.
It takes a long time and a lot of effort to open this account with a bank. It may take a few weeks for banks to respond "yes" and prepare the account for use.
Additionally, the fee of this service is not always obvious initially and can be rather high when converting foreign currency into Indian rupees.
Make sure you consider all these limitations carefully so you can make the right decision.
Here are some popular banks that allow customers to open international currency accounts:
HDFC Bank
ICICI Bank
Punjab National Bank
Axis Bank
DCB Bank
IndusInd Bank
Yes Bank
Standard Chartered Bank
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.
SWIFT Fees: Typically, the foreign money that reaches your EEFC account is an international SWIFT transfer rather than a local one. This implies that banks will charge the transaction a SWIFT fee. You, the sender, may bear this fee, or the parties may split it.
Transaction Fees: Every type of transaction, including outgoing and inward remittances, is subject to an additional transaction cost that differs from bank to bank. For instance, in both import and export operations, IndusInd Bank charges 0.125 percent of the total amount.
Additional Services: Banks offer additional services linked to EEFC accounts, like monthly account tracking and cheque facilities. While some banks offer these services without additional charges, some banks do charge for them.
Currency Conversion Fees: The majority of banks will charge a currency conversion fee or apply a foreign exchange markup to the current rate when you convert your foreign cash into Indian rupees.
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.
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).
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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