Current · Source: Reserve Bank of India · RBI/2011-12/564 · issued 16 May 2012 · ~1 min read
Quick answerRBI clarifies that the mandatory 50% conversion of EEFC balances to rupees applies only to available balances after netting off earmarked amounts for forward/option contracts booked before May 10, 2012.
The rule, in the simplest words
If you have an EEFC account (a bank account that keeps foreign money earned from exports), you must change half of it into Indian rupees (₹).
But first, you can subtract any money already set aside for forward/option contracts (agreements to buy or sell foreign money at a fixed rate in the future) that were made before May 10, 2012.
Only the money left after subtracting those set-aside amounts needs to be half-converted to rupees.
This rule helps exporters who already promised their foreign money in contracts, so they don't have to break those promises.
How it plays out — a real example
A forex & trade-finance officer in Mumbai helps an exporter customer who has ₹10 lakh in foreign money in their EEFC account. The customer had already set aside ₹4 lakh for a forward contract made on April 1, 2012. The officer subtracts the ₹4 lakh, leaving ₹6 lakh as the 'available balance', and then converts only half of that (₹3 lakh) to rupees, keeping the rest untouched.
What changed
RBI issued a clarification on May 16, 2012, regarding the earlier circular (May 10, 2012) that mandated converting 50% of EEFC balances to rupees. The clarification specifies that the conversion requirement applies only to the available balance after deducting amounts earmarked for outstanding forward or option contracts booked before May 10, 2012.
What it means for you
Banks and their customers can now exclude funds already committed under forward/option contracts from the mandatory 50% conversion. This reduces the immediate liquidity impact on exporters who had hedged their forex exposure before the rule was announced. It provides relief by ensuring that hedged positions are not disrupted by the conversion requirement.
What you must do
Update internal systems to calculate available EEFC balance by netting off earmarked amounts for forward/option contracts booked before May 10, 2012.
Advise customers to provide details of outstanding forward/option contracts booked before May 10, 2012, for accurate netting.
Ensure that only the net available balance is subject to the 50% conversion to rupee accounts.
Communicate this clarification to all relevant constituents and customers.
Who it affects
AD Category-I banks, Exporters maintaining EEFC accounts, Customers with outstanding forward/option contracts
❓ Common questions
Does the 50% conversion apply to all EEFC balances?
No, it applies only to the available balance after netting off amounts earmarked for outstanding forward/option contracts booked before May 10, 2012.
What if a customer has forward contracts booked after May 10, 2012?
The clarification specifically mentions contracts booked before May 10, 2012. Contracts booked on or after that date are not covered by this netting provision.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/564
A.P. (DIR Series) Circular No. 128
May 16, 2012
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 A.P. (DIR Series) Circular No. 124 dated May 10, 2012 on the captioned subject in terms of which 50% of the balances in the EEFC accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder.
2. Based on various queries received from Authorised Dealers, it is clarified that the conversion of the EEFC balances into rupee balances will only be applicable to available balances in the EEFC account which may be arrived at by netting off earmarked amounts on account of outstanding forward / option contracts booked before May 10, 2012.
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 are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Rashmi Fauzdar)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/564 · issued 16 May 2012. The plain-English explanation above is BankPulse’s own independent summary.
Update internal systems to calculate available EEFC balance by netting off earmarked amounts for forward/option contracts booked before May 10, 2012.
📜 Compliance
Advise customers to provide details of outstanding forward/option contracts booked before May 10, 2012, for accurate netting.
Ensure that only the net available balance is subject to the 50% conversion to rupee accounts.
Communicate this clarification to all relevant constituents and customers.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (AD Category-I banks, Exporters maintaining EEFC accounts, Customers with outstanding forward/option contracts), your first concrete step on “EEFC Balance Conversion: Netting Off Clarified” is: “Update internal systems to calculate available EEFC balance by netting off earmarked amounts for forward/option contracts booked before May 10, 2012.” (RBI issued this 16 May 2012).
Circular: RBI/2011-12/564 -- EEFC Balance Conversion: Netting Off Clarified
Issued: 16 May 2012
Action required: Update internal systems to calculate available EEFC balance by netting off earmarked amounts for forward/option contracts booked before May 10, 2012.
Action required: Advise customers to provide details of outstanding forward/option contracts booked before May 10, 2012, for accurate netting.
Action required: Ensure that only the net available balance is subject to the 50% conversion to rupee accounts.
Action required: Communicate this clarification to all relevant constituents and customers.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
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.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7218&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.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.