What changed
Previously, EEFC accounts could only be maintained as non-interest bearing current accounts. Now, exporters can hold up to US $1 million as term deposits maturing on or before October 31, 2008, and earn interest at rates determined by banks.
What it means for you
This temporary measure gives small and medium enterprises a chance to earn returns on idle foreign currency balances, helping them manage global market challenges. Banks can now offer term deposit products for EEFC balances, potentially attracting more exporters to maintain higher balances with them.
What you must do
- Update internal systems to allow EEFC term deposits up to US $1 million per exporter, with maturities up to one year ending by October 31, 2008.
- Set and communicate interest rates for these term deposits, ensuring compliance with RBI guidelines.
- Inform all eligible exporter customers about the new facility and its temporary nature.
- Monitor outstanding balances to ensure no exporter exceeds the US $1 million threshold for interest-bearing deposits.
Who it affects
All Category-I Authorised Dealer Banks, Exporters maintaining EEFC accounts, Small and medium enterprises engaged in exports
Can exporters earn interest on the entire EEFC balance?
No, interest is only payable on outstanding balances up to US $1 million per exporter. Balances above this limit remain in non-interest bearing current accounts.
What is the maximum tenure for these term deposits?
Term deposits can be for up to one year, but they must mature on or before October 31, 2008, as this is a temporary measure.
Who decides the interest rate on these deposits?
Banks themselves determine the interest rate for these EEFC term deposits, subject to their internal policies and market conditions.