EEFC Account: Rules for CCFE
Exporters and professionals keep foreign earnings in foreign currency, but only as a working account with a deadline.
An EEFC account lets a resident who earns foreign exchange keep it in foreign currency instead of converting it to rupees on arrival. An exporter who also imports, or a consultant who pays overseas vendors, saves two conversion spreads by receiving in dollars and paying out in dollars from the same account.
It is governed by Schedule I of the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015. Unlike RFC, it is a working account for current earnings, which is why it carries a conversion deadline and a ban on borrowing against it.
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Permitted Credits and Debits
| Entry | Side |
|---|---|
| 100% of foreign exchange earnings received by inward remittance through banking channels (other than loans or investments) | Credit |
| Advance remittance received by an exporter for export of goods or services | Credit |
| Professional earnings in an individual capacity: director's fees, consultancy, lecture fees, honorarium | Credit |
| Payments received for counter trade | Credit |
| Repayment of trade loans the holder made to an importer customer out of EEFC balances | Credit |
| Re-credit of unused foreign currency earlier drawn from the account | Credit |
| Disinvestment proceeds on conversion of shares to ADRs/GDRs under the Depository Receipts Scheme, 2014 | Credit |
| Foreign exchange received by an Indian startup from sales or exports by it or its overseas subsidiaries | Credit |
| Payments outside India for permitted current or capital account transactions | Debit |
| Payment in foreign exchange for goods bought from a 100% EOU or a unit in an EPZ, STP or EHTP | Debit |
| Customs duty, as provided in the trade policy | Debit |
| Trade-related loans or advances by an exporter holder to his importer customer abroad, as FEMA permits | Debit |
| Payment in foreign exchange to a resident for goods or services, including air fare and hotel bills | Debit |
| Withdrawal in rupees (the amount cannot be re-credited) | Debit |
Operating Rules That Get Tested
- Account form
- A non-interest bearing current account. It earns no interest, so it is a holding account for working foreign currency, not a savings product.
- Monthly conversion
- The total accruals in a calendar month must be converted into rupees on or before the last day of the next calendar month, after adjusting for approved uses and forward commitments.
- No credit against it
- No fund-based or non-fund-based credit facility may be granted against EEFC balances.
- Packing credit repayment
- Exporters may repay packing credit, rupee or foreign currency, from EEFC balances to the extent exports have actually taken place.
- ECGC and insurance claims
- Claims settled in rupees by ECGC or insurers are not export realisation in foreign exchange and cannot be credited to EEFC.
- Change of status
- If the holder becomes non-resident, balances may be credited to NRE or FCNR(B) at the holder's request.
Credit, debit and conversion MCQs. No signup.
How CCFE Tests This
Three facts carry most EEFC questions. Can a bank lend against EEFC balances? No, neither fund nor non-fund based. Is EEFC interest-bearing? No. By when must a month's accruals be converted? By the last day of the following month, after approved uses. The trap is confusing EEFC with RFC: RFC balances are free of restrictions and have no conversion clock; EEFC is a working account with both.
FAQs
What is an EEFC account?expand_more
An Exchange Earner's Foreign Currency account lets a resident exporter or professional keep foreign exchange earnings in foreign currency with an AD bank in India and use them for permitted payments abroad.
Does an EEFC account earn interest?expand_more
No. RBI's Master Direction requires the EEFC account to be non-interest bearing.
How much of export earnings can go into an EEFC account?expand_more
Up to 100% of foreign exchange earnings received through banking channels, other than loans or investments. The month's accruals must still be converted to rupees by the end of the next month after approved uses.
Can a bank give a loan against an EEFC balance?expand_more
No. Fund-based and non-fund-based credit facilities against EEFC balances are not permitted, though the exporter can use EEFC balances to repay packing credit to the extent exports have taken place.
Next steps
- RFC Accountarrow_forward
- Accounts Abroadarrow_forward
- Pre-shipment financearrow_forward
- FEMA & Trade Finance Conceptsarrow_forward
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