Foreign Currency Account Opened In India

A resident of India can open, hold and maintain foreign currency accounts in and outside India. The Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015 regulates the foreign currency accounts opened in India.

A person resident in India can open a foreign currency account in India with an authorised dealer. It is opened, held and maintained in the form of a current or savings or term deposit account. The account can be held either singly or jointly in the name of the person eligible to open, hold and maintain such an account.

Foreign Currency Account

A ‘Foreign Currency Account’ means an account held or maintained in a currency that is not the currency of India or Bhutan, or Nepal. Any person who is residing in India can open, hold and maintain a foreign account. ‘Person Resident in India’ is defined under Section 2(v) of the Foreign Exchange Management Act, 1999 (FEMA). 

‘Person resident in India’ means—

• Every person residing in India for more than one hundred and eighty-two days during the preceding financial year but does not include –
  • a person who has gone or stays outside India for taking up employment or carrying a business or vocation outside India or any other purpose where he/she indicates their intention to stay outside India for an uncertain period,
  • a person who has come to or stays in India, otherwise than for taking up employment or carrying on business or vocation in India or any other purpose where he/she indicates their intention to stay for an uncertain period in India.
• Every person or body corporate incorporated or registered in India,
• An office, agency or branch in India that is owned or controlled by a person resident outside India,
• An office, agency or branch outside India that is owned or controlled by a person resident in India.

Foreign Currency Accounts Opened In India

The major foreign currency accounts which a person resident in India can open are as follows –

Exchange Earner’s Foreign Currency (EEFC) Account:

Exchange Earner’s Foreign Currency (EEFC) account is in the form of a non-interest bearing current account. Special Economic Zones (SEZ) developers can open, maintain and hold EEFC accounts and credit their foreign exchange earnings to this account. The claims which are settled in rupees by the Insurance companies or the Export Credit Guarantee Corporation of India is not construed as the export realisation in foreign exchange, and thus, the claim amount cannot be credited to this account.

The sum total of the accruals during the current month in the account should be converted into Indian Rupees before the last day of the next month after adjusting for utilisation of the balances for forward commitments or approved purposes. Credit facilities, both non-fund and fund-based, are not granted against the balances held in this account. 

The exporters can repay the packing credit advances, whether obtained in foreign currency or Rupee from the balances in their EEFC account up to the extent of exports that have actually taken place. 

The balances in EEFC accounts can be credited to Non-Resident External (NRE) account or Foreign Currency Non-Resident (Bank) [FCNR (B)] account at the request or option of the account holders upon the change in the residential status from resident to non-resident. This account is useful for exporters who receive and keep foreign exchange payments in the banks in India.

Resident Foreign Currency Account (RFC)

Resident Foreign Currency (RFC) account can be opened by a person resident in India with an Authorised Dealer (AD) bank in India out of foreign exchange acquired or received by him/her from the following –

• Foreign Exchange received as superannuation benefits, pension or any other monetary benefits received from his employer outside India,
• By converting assets acquired by a person when he/she was a non-resident or through gift or inherited by a person resident outside India and repatriated to India,
• Received as the proceeds of the life insurance policy claims or maturity or surrender values that are settled in foreign currency from an insurance company permitted by the Insurance Regulatory and Development Authority for undertaking the life insurance business in India.

The RFC account can be in the form of current or savings or term deposit. The funds in this account will be free from all restrictions regarding the utilisation of foreign currency balances, including any restrictions on investments in any form outside India. The balances in the NRE account and FCNR (B) account can be credited to the RFC account upon a change in the residential status of the Non-resident Indian (NRI) to that of a Resident.

Resident Foreign Currency (Domestic) Account [RFC(D)] Account

A person resident in India can open the Resident Foreign Currency (Domestic) Account [RFC (D)] account in India out of the foreign exchange acquired him/her in the form of banknotes, currency notes and travellers’ cheque from overseas sources as follows:

• By way of payment for services which is not arising from any business or anything done in India while visiting any place outside India,
• As gift or honorarium or in settlement of any lawful obligation or for services rendered by any person who is not a resident in India and who is on a visit to India,
• Gift or honorarium while visiting any place outside India,
• A gift from a relative,
• In the form of unspent foreign exchange acquired from an authorised person for travelling abroad,
• By way of disinvestment proceeds obtained by the resident account holder upon conversion of the shares held by him/her to American Depositary Receipts or Global Depositary Receipts under the Depository Receipts Scheme, 2014,
• Received as the proceeds of the life insurance policy claims or maturity or surrender values that are settled in foreign currency from an insurance company permitted by the Insurance Regulatory and Development Authority for undertaking the life insurance business in India.

RFC(D) account is a current non-interest earning account with no ceiling on balances in this account. The balances in this account can be credited to the NRE account, or FCNR(B) account at the account holders’ request or option upon the change in their residential status from resident to non-resident.

The sum total of the accruals during the present month in the account should be converted into Indian Rupees before the last day of the next month after adjusting for utilisation of the balances for forward commitments or approved purposes.

Diamond Dollar Account (DDA)

The firms and companies may open and maintain Diamond Dollar Account (DDA) with the authorised dealer banks, subject to the following conditions:

• The exporters must comply with the eligibility criteria laid down in the Foreign Trade Policy of the Government of India, issued from time to time.
• The DDA will be opened in the exporters’ name and maintained only in US Dollars.
• The account can be only in the form of a current account, and there is no interest paid on balance held in the account.
• No intra-account transfer is allowed between the DDAs maintained by the account holder.
• An exporter firm or company is permitted to open and maintain five or less than five DDAs.
• The balances held in the accounts are subject to Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) requirements.
• The exporter firms and companies holding and maintaining foreign currency accounts, except EEFC accounts, with banks in India or abroad will not be eligible to open DDAs.

The sum total of the accruals during the present month in the DDA should be converted into Indian Rupees before the last day of the next month after adjusting for utilisation of the balances for forward commitments or approved purposes.

Frequently Asked Questions

Can I open a joint foreign currency account with a resident relative in India?

Yes. The Exchange Earners Foreign Currency (EEFC) Account and Resident Foreign Currency (RFC) Account can be opened with resident relatives either on a former or survivor basis. Relatives mean members of HUF, parents, spouse, son, daughter, daughter-in-law, son-in-law, brother and sister.

When can a resident individual open a foreign currency account outside India?

A resident individual can open a foreign currency account with a bank outside India in the following cases:

• A resident student who has gone abroad for studies. All credits to the account from India should be made in accordance with FEMA, rules and regulations made thereunder. Upon the return of the students to India after completion of studies, the account will be deemed to have been opened under the Liberalised Remittance Scheme (LRS).
• A resident who is on a visit to a foreign country to stay abroad. The balance in the account should be repatriated to India on the return of the account holder to India.
• A person going abroad to participate in an exhibition or trade fair for crediting the sale proceeds of goods. The balance should be repatriated to India within one month from the date of closure of the exhibition or trade fair.
• The following persons for remitting or receiving their entire salary payable to them in India:
  • A foreign citizen resident in India, who is an employee of a foreign company and is on deputation to the office, subsidiary, branch, joint venture or group company in India.
  • An Indian citizen who is an employee of a foreign company and is on deputation to the office, subsidiary, branch, joint venture or group company in India.
  • A foreign citizen who is a resident in India and is employed with an Indian company.
  • For the purpose of sending remittances under the Liberalised Remittance Scheme.

Can a resident continue to maintain an account outside India which was opened when he/she was a non-resident?

Yes. A person resident in India can maintain a foreign currency account outside India if he/she had opened it when he/she was resident outside India or inherited it from a person resident outside India.

What is the status of the foreign account on the demise of the account holder?

A resident nominee of a foreign account has to close the account and bring back the proceeds to India through banking channels.

Which banks can open foreign currency accounts?

An individual can open foreign currency accounts at SBI, ICICI Bank, Axis Bank or HDFC bank. An individual can open a foreign currency account either online or through the local branch, or at one of the banks he/she has a current relationship with.