Opening, holding and maintaining of foreign currency account regulated in terms of Section 9 of Foreign Exchange Regulation Act (FEMA) read with Foreign Exchange Management (Foreign Currency account by a Person Resident in India) Regulation, 2015.

Resident are permitted to maintain foreign currency account in or outside India as per the provisions contained (Foreign Currency account by a Person Resident in India) Regulation, 2015.

Meaning of Foreign Currency Account (FCA): ‘Foreign Currency Account’ means an account held or maintained in currency other than the currency of India or Nepal or Bhutan.

A person resident in India who has opened and maintaining FCA in accordance with the provisions of 6 & 7, may hold therein foreign exchange without any limit.

Foreign Currency Account that can be opened be held in India:

i)  Foreign Currency (Non-Resident) Account (Banks) Scheme – FCNR (B) Account

This account is maintained in Foreign exchange. Thus, there is no loss/gain due to the fluctuation of foreign exchange. Both principal and interest are repatriable.

Non-resident Indians (NRIs) and Person of Indian Origin (PIOs) are permitted to open and maintain these accounts with the authorised dealers and banks authorised by the Reserve Bank to maintain such accounts. Deposits may be accepted in any currency.

The accounts can be maintained only in the form of fixed deposits. The rate of interest and tenure applicable to these accounts are as per the directions/instructions of Reserve Bank of India.

Forward Contract and Hedging risks: A NRI can enter into cross currency (not involving Indian rupees) Forward contracts to convert the balances into FCNR (B) account in foreign currency to another foreign currency in which FCNR (B) deposits are permitted to be maintained.

Reserve Bank does not provide exchange rate guarantee top authorised dealers for deposits of any maturity in these accounts. Lending of resources mobilised by authorised dealers under the accounts are not subject to any interest rate stipulations.

ii)  Exchange Earner’s Foreign Currency (EEFC) Account:

A person resident in India may open EEFC account with the Authorised dealer in India, as per the regulation 4(A) of FEM (Foreign Currency Accounts by a person resident in India) Regulation, 2015.

This account is useful for exporters of goods and services to receive and keep payments in foreign exchange in bank in India.

Sl No. Debit to EEFC Account Credit to EEFC Account
1. Payment outside India towards the Capital and Current account transactions as per the provisions of FEMA. 100% foreign exchange earnings by way of inward remittance through normal banking channel (other than loans and investments).
2. Payment in foreign exchange towards cost of goods purchased from a 100% EOU or a unit in EPZ/STP/EHTP. Payment received for the purpose of counter trade. Advance remittance received by an exporter towards export of goods or services.
3. Payment of customs duty in accordance with the provisions of export import policy. Professional earnings including directors’ fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional for rendering services in his individual capacity.
4. Trade related loans/advances, by an exporter account holder to his importer customer outside India, subject to complying the provisions of FEMA Interest earned on the funds held in the account. Re-credit of unutilised foreign currency earlier withdrawn from the account.
5. Payment in foreign exchange to a person resident in India for supply of goods/services including payment of air fare and hotel expenditure. Repayment of trade related loan/advances (which were granted to the account holder’s importer customer out of balances held in the EEFC accounts).

Disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/GDRs under DR Scheme, 2014.

Withdrawal in rupees is permitted from EEFC but the amount so withdrawn cannot be re-credited to the account. The account will be in the form of a non-interest bearing account.

The claims settled in rupees by Export Credit Guarantee Corporation of India (ECGC)/Insurance companies should not be construed as export realisation in foreign exchange and the claim amount cannot be credited to EEFC account.

Fund based and Non fund based credit facilities should not be granted against the balance held in EEFC account.

iii) Resident Foreign Currency Account (RFC)

A Person resident in India is permitted to open a RFC account with an AD bank in India out of Foreign Exchange received or acquired by him from following:

  1. As pension or superannuation benefit or other monetary benefit from his overseas employer;
  2. By converting assets which were acquired by him when he was a non-resident or inherited from or gifted by a person resident outside India and repatriated to India;
  3. Before July 8, 1947 or any income arising or accruing thereon which is held outside India in pursuance of a general or special permission granted by RBI;
  4. Received as proceeds of LIC claims/maturity/surrendered value settled in forex from an Indian insurance company permitted to undertake life insurance business by the Insurance Regulatory and Development Authority.

The balances in the RFC account are free from all restrictions regarding utilisation of foreign currency balances outside India.

This account can be saving or current or term deposit.

iv) Resident Foreign Currency (Domestic) Account [RFC(D)] Account:

 A resident individual may open an RFC (D) account to retain in a bank account in India the foreign exchange acquired in the form of currency notes, bank notes and travellers cheque from overseas sources such as:

  • Payment while on a visit abroad for services not arising from any business or anything done in India;
  • Honorarium or gift or for services rendered or in settlement of any lawful obligation from any person not resident in India and who is on a visit to India;
  • Honorarium or gift while on a visit to any place outside India;
  • Gift from a relative;
  • Unspent foreign exchange acquired from an authorised person for travel abroad;
  • Representing the disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/GDRs under the DR Scheme, 2014;
  • By way of earning receives as a proceeds of life insurance policy claims/maturity/surrender values settled in the foreign currency from an insurance company in India permitted to undertake life insurance business by Insurance Regulatory and Development Authority (IRDA).

RFC(D) facility is in addition RFC facility. The account is current account and will not carry any interest.

Difference between RFC and RFC (D) account:

RFC account can be opened and maintained only by the NRI/PIO who has returned to India after working abroad. RFC(D) account can be maintained by resident individual, even if he is not NRI or PIO.

v) Account opened by SEZ Unit:

Unit in Special Economic Zone (SEZ) may open and maintain a foreign currency account with an authorised dealer in India to credit all foreign exchange funds received by the unit.

The account can be used for bonafide trade transaction between the unit and a person resident in or outside India. Foreign Exchange purchased in India against rupees cannot be credited to the account without prior permission from the Reserve Bank.

The funds held in these accounts cannot be lent or made available to any person or entity resident in India not being a Special Economic Zones.

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