EEFC Account or Exchange Earners Foreign Currency Account, is an account in the foreign currency denomination with an AD Category - I bank. It is a facility extended to the exporters/software companies or individuals who receive foreign currency. 100 % of their foreign exchange receipts can be received into their EEFC account.
An EEFC account can only be opened as a current account, hence interest isn’t payable on the EEFC accounts.
As mentioned earlier, 100% foreign exchange earnings can be credited to the EEFC accounts, all the credits accumulated in the account during a calendar month should be converted into Indian Rupees on or before the last day of the subsequent calendar month. However, if the exporter has some future payment commitments like import payments or buyer’s credit settlement, EEFC balances can be retained in the account beyond the last day by submitting a request letter to the respective bank along with the proof on the future payment dues.
Permissible credits to EEFC account are:
Any inward remittances can be credited to EEFC account apart from foreign currency loans, foreign investments.
Advance remittances received towards export of goods or services.
Payments received in the foreign currency by a firm in the Domestic Tariff Area for the supply of goods to a company in the Special Economic Zones (SEZ).
- Inward remittances received by an exporter from an account maintained with an authorized dealer for the purpose of countertrade. (Countertrade is an arrangement involving adjustment of value of the goods imported into India against value of goods exported from India in terms of the Reserve Bank guidelines).
- Professional fees including directors’ fee, consultancy fee, lecture fee, honorarium and other earnings received by a professional for providing services in his individual capacity.
- Re-credit of unutilized foreign currency earlier withdrawn from the account.
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 permitted by the Foreign Investment Promotion Board of the Government of India.
Permissible debits into EEFC account are:
i) Outward Payments towards permissible current account transactions permitted as per Foreign Exchange Management (Current Account Transactions) Rules, 2000] and capital account transactions permissible as per Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000].
ii) Any payments in foreign currency towards the purchase of goods 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.
iv) Trade-related loans, provided by an exporter to his importer outside India, subject to compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000.
v) Payments to a person resident in India for the supply of goods/services including payments for airfare and hotel expenditure.
EEFC balances can also be hedged against any foreign exchange fluctuations.