QA Series 05 - Exports Part 2

 

The Banking Tutor

Question Answer Series 2025

S No 05                                                                    09-06-2025

Exports – Part 02 

26. Who can open Earners’ Foreign Currency ( EEFC) Account ? 

A person resident in India may open with, an AD Category – I bank in India, an account in foreign currency called the Exchange Earners’ Foreign Currency (EEFC) Account. 

27. Can a Resident open EEFC account jointly with other resident ? 

Resident individuals are permitted to include resident close relative(s) as defined in the Companies Act 2013 as a joint holder(s) in their EEFC bank accounts on former or survivor basis. 

28. What type of account can be opened under EEFC ? 

EEFC account shall be maintained only in the form of non-interest bearing current account.

29. Can Banks accept balance in EEFC as collateral to any credit facility ? 

No credit facilities, either fund-based or non-fund based, shall be permitted against the security of balances held in EEFC accounts by the AD Category – I banks. 

30. What Credits are allowed in EEFC Accounts ? 

All categories of foreign exchange earners are allowed to credit 100% of their foreign exchange earnings to their EEFC Accounts subject to the condition that  The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. 

31. What is the aim of EEFC Account ? 

The facility of EEFC scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions. This facility is not intended to enable exchange earners to maintain assets in foreign currency, as India is still not fully convertible on Capital Account. 

32. Can the EEFC balance be utilised to extend trade related loans ? 

AD may permit their exporter constituents to extend trade related  loans/ advances to overseas importers out of their EEFC balances without any ceiling. 

33. Can the EEFC balance be utilised tom clear the loans ? 

AD may permit exporters to repay packing credit advances whether availed in Rupee or in foreign currency from balances in their EEFC account and / or Rupee resources to the extent exports have actually taken place. 

34. What is to be done when only a part of export credits are credited to EEFC Account ? 

Where a part of the export proceeds are credited to an EEFC account, the export declaration (duplicate) form may be certified as: “Proceeds amounting to …… representing ….. percent of the export realization credited to the EEFC account maintained by the exporter with……” 

35. What are the rules related to Counter Trade Proposals? 

Counter trade proposals involving adjustment of value of goods imported into India against value of goods exported from India in terms of an arrangement voluntarily entered into between the Indian party and the overseas party through an Escrow Account opened in India in US Dollar will be considered by the Reserve Bank subject to following conditions: 

(a) All imports and exports under the arrangement should be at international prices. 

(b) No interest will be payable on balances standing to the credit of the Escrow Account.

c) Surplus funds may be held in a short-term deposit up to a total period of three months in a year (i.e., in a block of 12 months) and the banks may pay interest. 

(c) No fund based/or non-fund based facilities would be permitted against the balances in the Escrow Account. 

36. What is the procedure related to for filing EDF related to Exports to neighbouring countries by road ? 

In case of exports by road transport, the form should be presented by exporter or his agent at the Customs station at the border through which the vessel or vehicle has to pass before crossing over to the foreign territory. 

37. What is the procedure related to for filing EDF related to Exports to neighbouring countries by  rail ? 

Customs staff has been posted at certain designated railway stations for attending to Customs formalities. They will collect the EDF for goods loaded at these stations so that the goods may move straight on to the foreign country without further formalities at the border.

For goods loaded at stations other than the designated stations, exporters must arrange to present EDF to the Customs Officer at the Border Land Customs Station where Customs formalities are completed. 

38. What are guidelines related to Counter –Trade arrangements with Romania? 

The Reserve Bank will consider counter trade proposals from Indian exporters with Romania involving adjustment of value of exports from India against value of imports made into India in terms of a voluntarily entered arrangement between the concerned parties, subject to the condition that the Indian exporter should utilize the funds for import of goods from Romania into India within six months from the date of credit to Escrow Accounts allowed to be opened. 

39. Can AD Bank factor export receivables on a non-recourse basis ? 

AD banks have been permitted to factor the export receivables on a non-recourse basis, so as to enable the exporters to improve their cash flow and meet their working capital requirements. 

40. What are the obligations of AD when export receivables are factored on non-recourse basis? 

AD bank, being the Export Factor, should have an arrangement with the Import Factor for credit evaluation & collection of payment. 

Notation should be made on the invoice that importer has to make payment to the Import Factor. 

After factoring, the Export Factor may close the export bills and report the same in the Export Data Processing and Monitoring System (EDPMS) of the Reserve Bank of India. 

In case of single factor, not involving Import Factor overseas, the Export Factor may obtain credit evaluation details from the correspondent bank abroad. 

41. What is meant by Project Exports ? 

Export of engineering goods on deferred payment terms and execution of turnkey projects and civil construction contracts abroad are collectively referred to as ‘Project Exports’. 

42. What is meant by Service Export? 

Service exports refer to the provision of intangible goods and services by residents of one country to individuals or companies in another country. These services can include things like financial services, IT consulting, and telecommunications, among others. Essentially, it's about selling services produced in one country to be used in another. 

43. What are regulatory guidelines for undertaking Project Exports ? 

Indian exporters are required to obtain the approval of the AD Banks/ Exim Bank at post-award stage before undertaking execution of such contracts. 

AD banks / Exim Bank may consider awarding post-award approvals without any monetary limit and permit subsequent changes in the terms of post award approval within the relevant FEMA guidelines / regulations. 

Project and service exporters may approach AD banks / Exim Bank based on their commercial judgment. 

The respective AD bank / Exim Bank should monitor the projects for which post-award approval has been granted by them. 

44. What are the facilities provided to ensure flexibility to Project and Service Exporters? 

In order to provide greater flexibility to project & service exporters in conducting their overseas transactions, facilities have been provided as under: 

a) Inter-Project transfer of machinery - The stipulation regarding recovery of market value (not less than book value) of the machinery, etc., from the transferee project has been withdrawn. 

Further, exporters may use the machinery / equipment for performing any other contract secured by them in any country. 

b) AD Bank) / Exim Bank may permit exporters to open, maintain and operate one or more foreign currency account/s in a currency/currencies of their choice with inter-project transferability of funds in any currency or country. The Inter-project transfer of funds will be monitored by the AD Bank /Exim Bank. 

c) Project / Service exporters may deploy their temporary cash surpluses, generated outside India investments in short-term paper abroad including treasury bills and other monetary instruments with a maturity or remaining maturity of one year or less and the rating of which should be at least A-1/AAA by Standard & Poor or P-1/-AAA by Moody’s orF1/AAA by Fitch IBCA etc., and as deposits with branches / subsidiaries outside India of AD Banks in India. 

d) The requirement of repatriation of 30 per cent of contract value in respect of on-site contracts by software exporter company / firm has been dispensed with. They should, however, repatriate the profits of on-site contracts after completion of the contracts. 

45. What are guidelines related to Export of goods on lease, hire, etc. ? 

Prior approval of the Reserve Bank is required for export of machinery, equipment, etc., on lease, hire basis under agreement with the overseas lessee against collection of lease rentals/hire charges and ultimate re-import. 

46. What are guidelines related to Export on elongated credit terms ? 

Exporters intending to export goods on elongated credit terms need prior permission from RBI. 

47. What are guidelines related to  Export of Currency ? 

Permission of Reserve Bank is required for any export of Indian currency except the following : 

(a) Any person resident in India may take outside India (other than to Nepal and Bhutan)  up to Rs.25,000/- 

(b) Any person resident outside India, not being a citizen of Pakistan and Bangladesh and also not a traveler coming from and going to Pakistan or Bangladesh, and visiting India may take outside India currency notes up to Rs. 25,000 / - while exiting only through an airport. 

48. What is the procedure to get EDF in respect of export of goods through Customs ports ? 

Customs shall certify the value declared and give running serial number on the two copies of Export Declaration Form (EDF), submitted by exporter at Non- Electronic Data Interchange (EDI) port. 

Customs shall retain the original EDF for transmission to the Reserve Bank and return the duplicate copy to the exporter.

At the time of shipment of goods, exporters shall submit the duplicate copy of the EDF to Customs. After examining the goods, Customs shall certify the quantity in the form and return it to the exporter for submission to AD for negotiation or collection of export bills. 

Within 21 days from the date of export, exporter shall lodge the duplicate copy together with relative shipping documents and an extra copy of the invoice to the AD named in the EDF. 

After the documents have been negotiated / sent for collection, the AD shall report the transaction through Export Data Processing and Monitoring System (EDPMS) to the Reserve Bank and retain the documents at their end.

49. What is the procedure related to  EDF in respect of exports made under deferred credit arrangement ? 

In case of exports made under deferred credit arrangement or to joint ventures abroad against equity participation or under rupee credit agreement, the number and date of the Reserve Bank approval and/or number and date of the relative RBI circular shall be recorded at the appropriate place on the EDF. 

50. What is to be done if Duplicate copy of EDF misplaced or lost ?

Where duplicate copy of EDF is misplaced or lost, AD may accept copy of duplicate EDF duly certified by Customs.

 

(Source : RBI MD updated 23^rd April, 2025)

 Next Issue  will be shared on 12^th  June 2025.

Sekhar Pariti

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