What changed
Previously, all foreign exchange earners could retain 100% of their earnings in EEFC accounts. Now, only 50% can be retained; the rest must be converted to rupees. Existing balances exceeding 50% must be converted within 15 days. Also, EEFC holders must use their balances before accessing the forex market for purchases.
What it means for you
Banks must ensure customers convert excess EEFC balances to rupees promptly. This reduces foreign currency liquidity in the system and may increase demand for rupee conversion services. Lenders need to update systems and obtain declarations from customers before selling forex.
What you must do
- Advise all EEFC account holders to convert balances above 50% to rupees within 15 days.
- Update internal systems to cap future EEFC retention at 50% of forex earnings.
- Obtain a declaration from customers before selling foreign exchange that they have fully utilized their EEFC balances.
- Report compliance to RBI's Foreign Exchange Department, Central Office, Mumbai within the stipulated timeframe.
- Communicate the changes to all relevant constituents, including RFC and DDA holders.
Who it affects
AD Category I banks, EEFC account holders (exporters, forex earners), RFC account holders, Diamond Dollar Account (DDA) holders
What is the new retention limit for EEFC accounts?
From now on, only 50% of forex earnings can be retained in an EEFC account. The remaining 50% must be converted to rupees.
What happens to existing EEFC balances above 50%?
Balances exceeding 50% must be converted to rupees and credited to the account holder's rupee account within a fortnight from the circular date.
Does this apply to RFC and Diamond Dollar Accounts?
Yes, the same 50% retention rule and usage conditions apply to RFC and DDA holders as well.