Residents with foreign currency can open these accounts. These include people like export earners, non residents on their becoming residents, those returning to the country with foreign exchange after a business trip or holiday and foreigners.
Different Types of Resident Foreign Currency Accounts
Different types of accounts that can be opened in foreign currency are given below :
- 1. Resident Foreign Currency Accounts (RFC)
- 2. Exchange Earners Foreign Currency Account (EEFC)
- 3. Resident Foreign Currency (Domestic) Account
- 4. Resident Foreign Currency (External) Account
- 5. Resident Foreign National’s account
- 6. Diamond Dollar Account.
1. Resident Foreign Currency Accounts (RFC)
Features of Resident Foreign Currency Accounts
- These accounts can be opened by a person of Indian nationality or Indian origin, who has returned to India for permanent settlement or persons inheriting assets abroad from persons who acquired such assets while being a non- resident.
- The account can be opened in any foreign currency excluding the currency of Nepal or Bhutan.
- Persons who have been residing outside India for a continuous period of more than one year (exclusive of short visits for personal reasons) who return to India for permanent settlement should change the status of their NRO/NRE Account from non-resident to resident and inform the bank of the change in status. Such persons should close NRE and FCNR (B) deposit accounts on maturity. The proceeds can be transferred either partly or completely to an RFC account.
Deposits that can be credited to the RFC account are:
- RFC account can be current, savings or fixed deposit account.
- The term of fixed deposits are ranging from 30 days to 6 months.
- Cheque facility is not available for RFC current accounts.
- Balance held in a RFC account is repatriable for a bona fide purpose.
- A RFC account is free from all restrictions concerning utilization
- Interest earned on the balance in this account is free of tax for 2 years
- The account can be operated jointly or individually.
- Nomination facility is available in RFC account.
- Loans can be granted against the balances lying in the account
- Remittances from abroad representing funds in bank accounts outside India, income such as dividend, interest, profit, rent, etc. earned on eligible assets held abroad and from the sale proceeds of eligible assets.
- Pension and other monetary benefits received from abroad arising out of employment taken up outside India prior to return to India.
- Interest earned on RFC Accounts.
- Foreign currency notes/ traveler’s cheques brought by returning non-residents.
- Balances in non-resident external accounts and foreign currency non-resident accounts.
- Earnings of insurance claims/ maturity value or surrender value of insurance policies taken by the holder when he was a non-resident and settled in foreign currency. It can include policies issued by insurance companies in India. But they should be registered with IRDA to conduct insurance business.
Funds in an RFC account are free from all restrictions regarding utilization. The funds can even be used for making investments outside India.
2. Exchange Earners Foreign Currency Account (EEFC)
The limits of credit facilities to the accounts are given below :
- 100% for Status Holder Exporter (as defined in EXIM Policy)
- 100% for Export Oriented Units, Units in Export Processing Zones (EPZs), Electronic Hardware Technology Park (EHTPs) and Software Technology Park (STP)
- 50% for persons resident in India
Individual professionals are allowed to keep up to 100 per cent of their foreign exchange earnings from consultancy and other services provided to persons or bodies outside India, in their Exchange earners’ foreign currency (EEFC) account. This is for the benefit and convenience of individual professionals, doctors, artists, architects, engineers, consultants, lawyers, chartered accountants, directors on boards of overseas companies, etc. Payments received in foreign exchange by a unit in domestic tariff area (DTA) for supply of goods to a unit in special economic zones (SEZ) out of its foreign exchange currency account may be credited to an EEFC account.
Exporters can avail trade related loans / advances to overseas importers out of their EEFC balances without any upper limit. They can also repay packing credit advances whether availed in rupee or in foreign currency from balances in their EEFC account or rupee resources to the extent exports have actually taken place. Purchase of foreign exchange from the market for refunding advance payments credited to accounts would be allowed only after utilizing the entire balance in the exporter’s EEFC accounts maintained at different banks. With regard to units in Special Economic Zones (SEZ):
- All foreign exchange funds received by the unit in the SEZ must be credited to this account. This also includes foreign exchange purchased by units in Domestic Tariff Area (DTA) for making payment towards goods supplied by Units in SEZ.
- Foreign exchange purchased in India against rupees will not be credited to the account without the permission of the Reserve Bank
- The funds should represent bona fide transactions of the unit in the SEZ.
- Balances in EEFC accounts sold forward by the account holders shall remain assigned for delivery and such contracts shall not be cancelled.
Investments in overseas joint ventures can be funded out of balances in EEFC accounts. Cheque facilities are available in EEFC account. Exporters are allowed to grant trade related loans/ advances from their EEFC account to overseas exporter or importer clients without any ceiling. Where the amount of loan exceeds US$ 1,00,000, a guarantee of a bank of international status located outside India will be required to be provided by the overseas borrower in favor of the lender. These funds are not to be lent or made available to any person or entity in India. The balances will be credited to NRE/FCNR (B) Account, at the request of the account holders. – Claims settled in rupees by ECGC (Export Credit and Guarantee Corporation of India Ltd) should not be interpreted as export realization in foreign exchange and claim amount must not be credited to the EEFC account. Prior approval of the Reserve Bank (RBI) is not required for remittances made from EEFC accounts for consultancy services received.
3. Resident Foreign Currency (Domestic) Accounts (RFCD)
- While on a visit to any place outside India by way of payment for services not arising from any business or anything done in India.
- From any person not resident in India and who is on a visit to India, as gift or for services rendered or in settlement of any lawful obligation.
- By way of gift or honorarium while on a visit to any place outside India.
- The unspent amount of foreign exchange obtained from an authorized person for travel abroad.
- The proceeds of life insurance policy claims/maturity/surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business.
- Being gifts received from close relatives.
These types of accounts are current accounts and will earn no interest. There are no maximum to the balance that may be held in these accounts. Balances in the RFCD accounts may be credited to NRE/FCNR (B) Account, at the request of the account holders consequent upon change in their residential status from resident to non-resident.
4. Resident Foreign Currency (External) Account (RFCE)
- The amount to be credited to such account should not exceed 75 percent of the salary accrued to or received by such person from the foreign company
- The outstanding salary is paid in rupees in India
- Income tax paid on the entire salary in India.
The surplus funds held in this account must not be invested abroad without prior permission of the RBI and any funds rendered surplus should be send back to India.
- Account number, name of bank, place and country where the account is opened within 15 days from the date of opening the account
- Statement of operation on the account on half yearly basis
- Bank certificates confirming the amount repatriated periodically
Closure of foreign currency (RFCE) account with bank certificates evidencing transfer of balance to India immediately on completion of the relevant contract. A liberalized remittance scheme of US$ 25000 for resident individuals per calendar year for any purpose has been introduced. Resident individuals are permitted to open, maintain and hold foreign currency accounts with a bank outside India without the prior approval of the RBI for the purpose of making remittances under the scheme.
Branches of foreign firms in India and foreign nationals resident in India (not permanently resident in India) are permitted to open such bank accounts. But care should be taken that the foreign currency is not given to residents. No rupee loans can be given under this account except personal loans, this may be up to Rs.5 lakhs.
Diplomatic personnel, Diplomatic missions and non-diplomatic staff of foreign embassies, who are nationals of the concerned foreign countries and holding official passport, can maintain foreign currency deposit accounts.
5. Resident Foreign Nationals account
Information / statements to be submitted:
A firm or company incorporated in India can open, hold and maintain a foreign currency account outside India by making remittances from India for the purpose of regular business operations of a branch office or a representative there. Indian companies or individuals carrying out turnkey projects or civil construction contract may also be able to open foreign currency accounts abroad. A national of another country living in India and working for a foreign company on delegation in India or a citizen of India employed by a foreign company outside India on deputation in India may open, hold and maintain a foreign currency account (RFCE) with a bank outside India and receive the salary payable to him for services rendered in India, by credit to such account provided that :
A person resident in India can open RFCD accounts out of foreign exchange acquired in the form of currency notes, bank notes and traveler’s cheques acquired in the following ways:
6. Diamond Dollar Account (DDA)
Nevertheless not more than five Diamond Dollar Accounts can be opened with banks. Under the Diamond Dollar Account (DDA) Scheme, it would be in order for banks to liquidate PCFC granted to a DDA holder by dollar proceeds from sale of rough, cut and/ or polished diamonds by him to another DDA holder.
Diamond dollar accounts (DDA) can be opened by firms and companies dealing in purchase/sale of rough, cut or polished diamonds / diamond studded jewelry. They must have a track record of at least three years in import or export of diamonds and an average annual turnover of Rs. 5,00,00,000 or above during preceding three licensing years (from April to March)
A person resident in India can open, hold and maintain EEFC accounts; the account will be maintained only in the form of non-interest bearing current account. Credit facilities such as fund-based or non-fund based, are not permitted against the security of balances held in the account.