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:-
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;
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.
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.
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