Tuesday, June 28, 2016

Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015


Reserve Bank of India makes the following regulations for opening, holding and maintaining of Foreign Currency Accounts and the limits up to which amounts can be held in such accounts by a person resident in India:

Restriction on holding foreign currency account by a person resident in India:-

A person resident in India shall open or hold or maintain a foreign currency account only as per guidelines provided here under.

Foreign Currency Account held or maintained before the commencement of these Regulations, shall be deemed to be held under these Regulations:

RBI may permit a person resident in India to maintain a Foreign Currency Account, subject to the terms and conditions as may be considered necessary.

Opening, holding and maintaining Foreign Currency Accounts in India

(A) Exchange Earners’ Foreign Currency Account:-

A person resident in India may maintain with an authorised dealer in India, a Foreign Currency Account to be known as Exchange Earners’ Foreign Currency (EEFC) Account.

(B) Resident Foreign Currency Account:-

(1)  A person resident in India may maintain with an authorised dealer in India a Foreign Currency Account, to be known as a Resident Foreign Currency (RFC) Account, out of foreign exchange –

(a)  Received as pension or any other superannuation or other monetary benefits from his employer outside India; or
(b) Realised on conversion of the assets and repatriated to India; or
(c)  Received or acquired as gift or inheritance; or
(d) Acquired as gift or inheritance; or
(e)  Received as the proceeds of life insurance policy settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the IRDA.

(2)           The funds in a RFC Account shall be free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form, outside India.

(3)Resident individuals are permitted to include resident relatives as joint holders in their Resident Foreign Currency account on ‘former or survivor’ basis.

(C) Resident Foreign Currency (Domestic) Account

(1) A resident Individual may maintain with an Authorised Dealer in India a foreign currency account, to be known as Resident Foreign Currency (Domestic) Account, out of foreign exchange acquired in the form of currency notes, bank notes and travellers’ cheques as under:

(a)  by way of payment for services while on a visit to any place outside India;  
(b) from any non resident who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation; or
(c)  by way of honorarium or gift while on a visit to any place outside India; or
(d) in the form of unspent amount of foreign exchange acquired by him from an authorised person for travel abroad; or
(e)  as gift from a relative;
(f)   by way of earning through export of goods/ services, or as royalty, honorarium or by any other lawful means;
(g) representing the disinvestment proceeds received on conversion of shares under the DR Scheme, 2014.
(h) by way of earnings received as the proceeds of life insurance policy settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the IRDA

(2)           Debits to the account shall be for payments towards permissible current account and capital account transactions.

(3)           Account shall be maintained as a Current Account without interest payment.

(4)           There shall be no ceiling on the balances in the account

(D) A Unit in a Special Economic Zone (SEZ)

A unit located in a Special Economic Zone may maintain a Foreign Currency Account with an authorized dealer in India provided that,

(a)  all foreign exchange funds received by the unit in the Special Economic Zone (SEZ) are credited to such account,
(b) no foreign exchange purchased in India against rupees shall be credited to the account without prior permission of RBI,
(c)  the funds shall be used for bonafide trade transactions of the unit,
(d) the balances in the accounts shall be exempt from the restrictions imposed under Rule 5 of FEMA

Funds held in these accounts shall not be made available in any manner to any person or entity resident in India not being a unit in Special Economic Zones.

(E) Diamond Dollar Accounts (DDAs)

An Authorized Dealer Category-I bank in India may allow firms and companies to maintain Diamond Dollar Accounts (DDAs) in India subject to the terms and conditions of the DDA Scheme.

(F) Exporters

A resident exporter who has undertaken a construction contract or a turnkey project outside India or who is exporting services or engineering goods from India on deferred payment terms may maintain a Foreign Currency Account with a bank in India, provided that -

(a)  approval has been obtained for undertaking the project, and

(b) the stipulated terms and conditions have been duly complied with.

(G) Other cases

(1) The Indian agent of a shipping or an airline company incorporated outside India, may maintain a Foreign Currency Account with an authorized dealer in India for meeting the local expenses in India:
The credits to such accounts should only be by way of freight or passage fare collections in India or from his principal outside India.

(2)           An authorized dealer in India may allow ship-manning/ crew managing agencies in India to maintain non-interest bearing foreign currency accounts in India for the purpose of undertaking business transactions.

(3)           An authorized dealer in India may allow Project Offices set up in India by foreign companies to maintain non-interest bearing foreign currency accounts in India for the projects to be executed in India.

(4)           An Indian company receiving foreign investment under the FDI route maintain a foreign currency account with an Authorized Dealer in India.
Provided that the the account shall be closed immediately after the requirements are completed and in no case beyond six months from the date of opening.

(5) An authorized dealer in India may allow opening temporary foreign currency accounts by organisers of international seminars, conferences, conventions etc. for holding such events in India for the receipt of the delegate fees and payment towards expenses.

Opening, holding and maintaining a Foreign Currency Account outside India:-

(A) Accounts of authorised dealers or their branches

(1)           An authorised dealer in India may maintain a Foreign Currency Account for the purpose of transacting foreign exchange business and other matters incidental thereto.

(2)  A foreign branch of an Indian bank may maintain with a bank outside India, a Foreign Currency Account for the purpose of carrying on normal banking business outside India, subject to compliance with the directions of RBI and the regulatory authority in the country where the branch is located.

(B) Account by a company/ firm in the name of its office/ branch/ representative outside India

An entity registered or incorporated in India may maintain in the name of its office or its branch or its representative posted outside India, a foreign currency account with a bank outside India by making remittances from India for the purpose of normal business operations;

Provided that –

(a)  the overseas branch or representative is posted overseas for conducting normal business activities of the Indian entity;
(b) the total remittances to all such accounts in an accounting year shall not exceed
(i)             15% of the average annual sales/ income or turnover of the Indian entity during the last two financial years or up to 25% of the net worth, whichever is higher, where the remittances are made to meet initial expenses of the branch or office or representative; and

(ii)           10% of such average annual sales/ income or turnover during the last financial year where the remittances are made to meet recurring expenses of the branch or office or representative;
(c)  the overseas unit shall not enter in any contract or agreement in contravention of the Regulations;

the account so opened, held or maintained shall be closed, and the balance held in the account shall be repatriated to India;
(i)             if the overseas unit is not set up within 6 months of opening the account, or
(ii)           within one month of closure of the overseas branch/ office, or
(iii)         where no representative is posted for six months,

The restriction contained in clause (b) shall not apply in a case where –
1)    the remittances are made out of funds held in EEFC account of the Indian entity, or
2)    the overseas branch is set up or representative posted by a 100% Export Oriented Unit (EOU) or a unit in Export Processing Zone (EPZ) or in a Hardware Technology Park or in a Software Technology Park, within two years of establishment of the Unit.

Explanation: For the purpose of this sub-Regulation,

1)    Acquisition of office equipment and other assets required for normal business operations will not be deemed as a capital account transaction;

2)    Transfer or acquisition of immovable property outside India, other than by way of lease not exceeding five years, will be subject to the FEMA Regulations, 2015.

(C)         Exporters

A person resident in India, who has undertaken a construction contract or a turnkey project outside India or who is exporting services or engineering goods from India on deferred payment terms may maintain a Foreign Currency Account with a bank outside India, provided that -
a)  approval has been obtained for undertaking the project, and

b)              the terms and conditions have been duly complied with.

(D) For making Overseas Direct Investment

An Indian party may maintain Foreign Currency Account abroad for the purpose of making overseas direct investments subject to the following terms and conditions:

(a)  The Indian party is eligible for making ODI in terms of FEMA

(b) The host country regulations stipulate that the investment is required to be routed through a designated account.

(c)  The account shall be maintained as per the regulation of the host country.

(d) The remittances to the account should be utilized only for making ODI into the Joint Venture/ Wholly Owned Subsidiary (JV/ WOS) abroad.

(e)  Any amount received in the account from the subsidiary shall be repatriated to India within 30 days from the date of credit.

(f)   The Indian party should submit the transaction details of the account on yearly basis to the designated AD bank with a certificate from the Statutory Auditors of the Indian party certifying that the account was maintained as per the host country laws and the extant FEMA regulations applicable.

(g) The account so opened shall be closed immediately or within 30 days from the date of disinvestment from JV/ WOS or cessation thereof.

(E) Accounts in respect of Startups

An Indian startup or any other entity as notified by the Reserve Bank, having an overseas subsidiary, may open a foreign currency account with a bank outside India for the purpose of crediting to it foreign exchange earnings out of exports/ sales made by the said entity and/ or the receivables, arising out of exports/ sales, of its overseas subsidiary.

Provided that the balances in the account shall be repatriated to India within the period prescribed in FEMA.

(F) Other Cases

(1)           Subject to compliance with the conditions in regard to raising of External Commercial Borrowings (ECB) or raising of resources through American Depository Receipts (ADRs) or Global Depository Receipts (GDRs), the funds so raised may, pending their utilisation or repatriation to India, be held in deposits in foreign currency accounts with a bank outside India.

(2)           A shipping or airline company incorporated in India may maintain with a bank outside India, a Foreign Currency Account for the purpose of undertaking transactions in the ordinary course of its business.

(3)  Insurance/ reinsurance companies registered with IRDA to carry out business may maintain a Foreign Currency Account with a bank outside India for the purpose of meeting the expenditure incidental to the business and for that purpose, credit to such account the premia received by them outside India.”

(4)           Resident individuals may maintain foreign currency accounts with a bank outside India for making remittances under the Liberalised Remittance Scheme.

(5)           A person resident in India who has gone out of India to participate in an exhibition/ trade fair outside India may maintain a Foreign Currency Account with a bank outside India for crediting the sale proceeds of goods on display in the exhibition/ trade fair:
Provided that the balance in the account is repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/ trade fair.

 (6) A person resident in India who has gone abroad for studies may maintain a Foreign Currency Account with a bank outside India during his stay outside India.
Provided that on his return to India, such an account will deemed to have been opened under the Liberalised Remittance Scheme.

(7)           A person resident in India who is on a visit to a foreign country may maintain a Foreign Currency Account with a bank outside India, provided that on his return, the balance in the account is repatriated to India.

(8) (i)
·       A citizen of a foreign State, resident in India, being an employee of a foreign company or
·       a citizen of India, employed by a foreign company outside India and
·       in either case on deputation to the branch in India of such foreign company
may maintain a foreign currency account with a bank outside India and receive the whole salary payable to him by credit to such account, subject to payment of taxes, as applicable in India.

(ii) A citizen of a foreign State resident in India being in employment with a company incorporated in India may maintain a foreign currency account with a bank outside India and remit the whole salary received in India in Indian Rupees, to such account,  subject to payment of taxes, as applicable in India.

Types of accounts:-

a)     in the form of current or savings or term deposit account in cases where the account holder is an individual, and in the form of current account or term deposit account in all other cases:
Provided that the EEFC account shall be maintained in a manner as prescribed by the Reserve Bank.

b) singly or jointly in the name of person eligible to maintain such account.

Remittances out of the account after the account holder's death:-

On the death of a foreign currency account holder, -

a)  the authorised dealer may remit to a nominee resident outside India, to the extent of his share from the account of the deceased;

b) a nominee resident in India, who wants to remit funds outside India out of his share for meeting the liabilities of the deceased, may apply to the RBI;

c)A resident nominee of an account held outside India shall close the account and bring back the proceeds to India through banking channels.

Responsibility of authorised dealers maintaining foreign currency accounts:-
An authorised dealer maintaining foreign currency accounts shall -

a)  comply with the directions of RBI; and
b) submit periodic return or statement, to RBI.



Exchange Earner's Foreign Currency (EEFC) Account Scheme

1. Limit up to which foreign currency may be credited to EEFC account

(1) A person resident in India may credit to the EEFC Account 100% of the foreign exchange earnings as specified here under:

i) inward remittance through banking channel, other than the
·       remittance received pursuant to any undertaking given to RBI or
·       which represents foreign currency loan raised or
·       investment received from outside India or
·       those received for meeting specific obligations by the account holder;

ii) payments received in foreign exchange by a 100% Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area and also payments received in foreign exchange by a unit in Domestic Tariff Area for supply of goods to a unit in Special Economic Zone (SEZ);

iii) payments received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade;

iv) advance remittance received by an exporter towards export of goods or services;

v)              payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorised dealer in India;

(vi) Professional earnings including director’s fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity.

(vii) Payments received in foreign exchange by an Indian startup, or any other entity as notified by the Reserve Bank, arising out of exports/ sales made by the said entity or its overseas subsidiaries, if any.

(2) For the purpose of the sub-paragraph (1), payment received through an international credit card for which reimbursement will be provided in foreign exchange may be regarded as a remittance through banking channels.

2. Permissible credits to EEFC account
i)  Inward remittance/ payment received in foreign exchange subject to the provisions;
ii)  Interest earned on the funds held in the account;
iii) Re-credit of unutilised foreign currency earlier withdrawn from the account;
iv)  Repayment of loan/ advances by the account holder's importer customer,.
v)              Disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/ GDRs

3. Permissible debits to the EEFC account
i)    Payment outside India towards a permissible current account and capital account transaction.
ii)  Payment in foreign exchange towards cost of goods purchased from a 100% 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.
iv)            Trade related credit, by an exporter holding such account, to his importer customer outside India.
v)  Payment in foreign exchange to a person resident in India for supply of goods/ services including payments for air fare and hotel expenditure.

4. Miscellaneous:-

i)    There is no restriction on withdrawal in rupees of funds held in an EEFC account. However, the amount so withdrawn cannot be re-credited to the account.

ii)Authorised dealer may issue cheque books with the superscription "EEFC Account", and also satisfy himself while honoring the cheques that the payment made is permissible under these Regulations.

(iii) Resident individuals are permitted to include resident relative(s) as a joint holder(s) in their EEFC account on ‘former or survivor’ basis.
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Diamond Dollar Account (DDA) Scheme

1.Firms and companies may open and maintain DDA with AD Category–I banks, subject to the following terms and conditions:-

a)   The exporter should comply with the eligibility criteria.

b) The DDA shall be opened in the name of the exporter and maintained in US Dollars only.

c)  The account shall only be in the form of current account and no interest should be paid.

d) No intra-account transfer should be allowed between the DDAs maintained by the account holder.

e) An exporter shall be permitted to maintain up to 5 DDAs.

f)  The balances held in the accounts shall be subject to CRR & SLR.

g)              Exporter maintaining foreign currency accounts, excluding EEFC accounts, with banks in India or abroad, are not eligible to open Diamond Dollar Accounts.

2.              Permissible Credits:-

i.          Amount of pre-shipment and post-shipment finance availed in US Dollars.
ii.         Realisation of export proceeds from shipments of rough, cut, polished diamonds and diamond studded jewellery.
iii.         Realisation in US Dollars from local sale of rough, cut and polished diamonds.

3.              Permissible Debits:-

i.          Payment for import/ purchase of rough diamonds from overseas/ local sources.
ii.         Payment for purchase of cut and polished diamonds, coloured gemstones and plain gold jewellery from local sources.
iii.         Payment for import/ purchase of gold from overseas/ nominated agencies and repayment of US Dollars loans availed from the bank.
iv.        Transfer to rupee account of the exporter.

4. Application Procedure:-

The exporter shall make an application to the AD Category – I bank. AD Category - I banks should assess its track record at the end of every licensing year (April-March). In case it fails to meet the eligibility criteria, the account may be closed immediately.

Based on RBI circular amended up to 1st June 2016. For further details please refer www.rbi.org.in ……………Poppy
This circular supercedes circular dated 4/2/16 uploaded on this website on 8/2/16.