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EEFC Account Interest Facility Withdrawn from Nov 1, 2008

Current · Source: Reserve Bank of India · RBI/2008-09/118 · issued 04 Aug 2008 · ~1 min read
Quick answerRBI withdraws the temporary interest-earning facility on EEFC accounts for exporters, effective November 1, 2008. All EEFC accounts must be maintained as non-interest bearing current accounts from that date.
The rule, in the simplest words
How it plays out — a real example

A branch operations officer in Indore, Priya, manages several exporter clients. On October 15, 2008, she calls Mr. Sharma, a small exporter, to explain that his EEFC account will stop earning interest from November 1, 2008, and will become a regular current account. Priya updates her bank's system to reclassify all EEFC accounts as non-interest bearing, ensuring compliance with the RBI circular.

What changed

The temporary permission allowing exporters to earn interest on EEFC account balances up to USD 1 million, valid until October 31, 2008, has been withdrawn after review with the Government of India. From November 1, 2008, all EEFC accounts can only be opened and maintained as non-interest bearing current accounts.

What it means for you

Exporters will lose the ability to earn interest on their EEFC balances beyond the current temporary period. Banks must reclassify existing EEFC accounts to non-interest bearing current accounts from November 1, 2008, impacting customer relationships and product offerings.

What you must do

Who it affects

All Category-I Authorised Dealer Banks, Exporters maintaining EEFC accounts

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What is the effective date for the withdrawal of interest on EEFC accounts?

The withdrawal is effective from November 1, 2008. After this date, all EEFC accounts must be non-interest bearing current accounts.

Does this circular affect all EEFC accounts or only those with balances over USD 1 million?

It affects all EEFC accounts. The earlier temporary measure allowed interest on balances up to USD 1 million per exporter, but from November 1, 2008, no EEFC account can earn interest.

📜 Read the original circular — full text as issued by RBI
RBI/2008-09/118 A. P. (DIR Series) Circular No. 04 August 04, 2008 To,            All Category – I Authorised Dealer Banks Madam / Sir, Exchange Earner's Foreign Currency (EEFC) Account Attention of Authorised Dealer Category - I (AD Category – I) banks is invited to paragraph 2 of A. P. (DIR Series) Circular No. 13 dated October 6, 2007 , in terms of which all exporters, as a temporary measure, were permitted to earn interest on Exchange Earners' Foreign Currency (EEFC) accounts to the extent of outstanding balances of USD 1 million per exporter. The permission was valid up to October 31, 2008 and was subject to review. 2. The measure has since been reviewed in consultation with the Government of India and it has been decided to withdraw the facility from November 01, 2008. Accordingly, with effect from November 01, 2008, all EEFC accounts shall only be permitted to be opened and maintained in the form of non-interest bearing current accounts. 3. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 4. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully,   (Salim Gangadharan) Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/118 · issued 04 Aug 2008. The plain-English explanation above is BankPulse’s own independent summary.
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Who does what — compliance checklist
💻 IT / Systems
  • Update internal systems and product documentation to reflect the change.
📜 Compliance
  • Inform all EEFC account holders about the withdrawal of interest facility effective November 1, 2008.
  • Reclassify all EEFC accounts as non-interest bearing current accounts from November 1, 2008.
  • Ensure compliance with FEMA Sections 10(4) and 11(1) for this circular.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All Category-I Authorised Dealer Banks, Exporters maintaining EEFC accounts), your first concrete step on “EEFC Account Interest Facility Withdrawn from Nov 1, 2008” is: “Inform all EEFC account holders about the withdrawal of interest facility effective November 1, 2008.” (RBI issued this 04 Aug 2008).

  1. Circular: RBI/2008-09/118 -- EEFC Account Interest Facility Withdrawn from Nov 1, 2008
  2. Issued: 04 Aug 2008
  3. Action required: Inform all EEFC account holders about the withdrawal of interest facility effective November 1, 2008.
  4. Action required: Reclassify all EEFC accounts as non-interest bearing current accounts from November 1, 2008.
  5. Action required: Update internal systems and product documentation to reflect the change.
  6. Action required: Ensure compliance with FEMA Sections 10(4) and 11(1) for this circular.
  7. Owner: ____________ Target date: ____________
  8. Board/committee approval needed? Y / N
  9. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4404&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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