What changed
The earlier circular (May 10, 2012) had capped EEFC retention at 50% of export earnings, with the balance to be surrendered. This circular restores the pre-May 2012 position allowing 100% retention, but introduces a mandatory monthly conversion cycle: all accruals in a calendar month must be converted to rupees by the last day of the next month, net of approved usage or forward commitments. The same rule now applies to RFC (Domestic) and Diamond Dollar accounts, though RFC accounts were earlier excluded from the 50% cap.
What it means for you
Banks must update their EEFC, DDA, and RFC (Domestic) account operations to allow 100% credit of export earnings, but enforce a strict monthly conversion deadline. This reduces the flexibility for customers to hold foreign currency indefinitely, as balances must be converted or utilized within a defined window. For lenders, it simplifies compliance but requires close monitoring of monthly accruals and conversion dates to avoid regulatory breaches.
What you must do
- Update internal systems and customer agreements to reflect 100% retention of export earnings in EEFC accounts effective August 1, 2012.
- Implement a monthly tracking mechanism to ensure all accruals in a calendar month are converted to rupees by the last day of the following month, after adjusting for approved uses or forward commitments.
- Communicate the revised guidelines to all constituents holding EEFC, DDA, or RFC (Domestic) accounts, including the new conversion timeline.
- Ensure that balances outstanding as on July 31, 2012, and accruals from August 1, 2012, are converted to rupees by September 30, 2012.
Who it affects
All Category-I Authorised Dealer banks, Exporters and foreign exchange earners holding EEFC accounts, Diamond Dollar Account holders, Resident Foreign Currency (Domestic) account holders
What is the key change from the May 2012 circular?
The May 2012 circular had reduced EEFC retention to 50% of export earnings. This circular restores 100% retention but adds a mandatory monthly conversion requirement: all accruals in a calendar month must be converted to rupees by the last day of the following month.
Does this apply to RFC (Domestic) accounts?
Yes, the same stipulations now apply to RFC (Domestic) and Diamond Dollar accounts, though RFC accounts were earlier excluded from the 50% cap via a July 18, 2012 circular.
What is the deadline for converting existing balances?
Balances outstanding as on July 31, 2012, and accruals from August 1, 2012, must be converted to rupees by close of business on September 30, 2012.