L. B. Singhal
Director General

Sub: Implementation of foreign trade policy amendments, relating to EOUs, by RBI

In the Foreign Trade Policy, released by the Government of India on 31-8-04, following 3 changes have been carried-out relating to RBI:-

 (i)  Paragraph 6.12(d) of the Foreign Trade Policy provides that EOUs/EHTP/STP/ BTP units will be permitted to realize export proceeds within 12 months.

(ii) Paragraph 6.12(e) of the Foreign Trade Policy provides that EOUs will be allowed to retain 100% of its export earning in the EEFC.

(iii) Paragraph 6.12 (c ) of the Foreign Trade Policy provides that an Offshore Banking Unit will extend credit on the same terms and conditions as extended to units to SEZs

We had taken up this issue with the DGFT and the Ministry of Commerce requesting them to take up this issue with the RBI so that these 3 provisions could be implemented immediately. This was also discussed in person with Shri S. N. Menon, Commerce Secretary, Ministry of Commerce, Shri G. K. Pillai, Additional Secretary, Ministry of Commerce and Shri Jayant Dasgupta, Joint Secretary, Ministry of Commerce.

Now RBI has issued A.P.(DIR Series) Circular No. 25 dated 1^st November, 2004 for implementation of 2 of these provisions. A copy of this Circular is enclosed alongwith. The Circular provides as follows:-

(i) Following the announcement by the Government in the Foreign Trade Policy in September 2004, it has been decided that 100% EOUs and units set up under the EHTPs/STP/ and BTP Scheme would be allowed to realize the full value of export proceeds within a period of  12 months from the date of export. (Accordingly the provisions incorporated under Paragraph 6.12 (d) of the Foreign Trade Policy have been implemented).

(ii) This Circular further provides that the existing guidelines relating to 100% credit of foreign exchanges to EEFC account by the above units would continue as hitherto. (Hence RBI has reiterated the provisions incorporated under Paragraph 6.12(e) of the Foreign Trade Policy. It may be recalled that RBI had issued A.P.(DIR Series) Circular No. 96 dated June 15, 2004 wherein the instructions for permitting EOUs to retain 100% of their export earnings in the EEFC account was reiterated. Hence 100% retention in the EEFC account was permitted as against the earlier eligibility of permitting credit upto 70%. A copy of this Circular is also enclosed for ready reference).

Now the provisions of Paragraph 6.12 (c ) of the Foreign Trade Policy regarding OBU extending the credit to the EOUs on the same line as extended to SEZ units remains to be implemented. On this issue Shri G. K. Pillai, Additional Secretary & Chairman Board of Approvals, Ministry of Commerce, had a meeting with RBI and representative of OBUs in Mumbai on 15-9-04.  We have taken up the matter again with Ministry of Commerce.

This is for your information please.

RBI/2004-05/264
A.P. (DIR Series) Circular No. 25

November 1, 2004

To
All Banks Authorised to Deal in Foreign Exchange

Madam / Sirs,

Export of Goods and Services Period of Realisation for Export Oriented Units (EOUs)

Attention of Authorised Dealer (AD) banks is invited to the proviso 3 of sub-regulation (1) of Regulation 9 of Notification No. FEMA 23/2000-RB dated May 3, 2000 in terms of which the Reserve Bank has been empowered to extend the period for realisation and repatriation of export proceeds to India beyond six months.

2. Following the announcement by the Government in the Foreign Trade Policy in September 2004, it has been decided that 100 per cent Export Oriented Units (EOUs) and units set up under the Electronics Hardware Technology Parks (EHTPs), Software Technology Parks (STPs) and Bio-Technology Parks (BTPs) Schemes would be allowed to realise and repatriate the full value of export proceeds within a period of twelve months from the date of export.

3. The existing guidelines relating to 100 per cent credit of foreign exchange earnings to EEFC account by the above units would continue as hitherto.

4. This relaxation will be available in respect of exports made on or after September 1, 2004.

5. Authorised Dealer banks may bring the contents of this circular to the notice of their constituents and customers.

6. The direction contained in this circular has been issued under Sections10(4) and 11(1) of the Foreign Exchange Management Act,1999 (42 of 1999) and is without prejudice to permissions/approvals, if any, required under any other law.

Yours faithfully

F. R. Joseph

Exchange Earner's Foreign Currency (EEFC) Account Scheme - Liberalisation - A.P.(DIR Series) Circular No. 96

RBI/2004/246
A.P.(DIR Series) Circular No.96

June 15, 2004

To
All Authorised Dealers in Foreign Exchange

Dear Sirs/Madam,

Exchange Earners' Foreign Currency (EEFC) Account Scheme - Liberalisation

In terms of Regulation No.4, of the Notification No.FEMA 10/2000-RB dated May 3, 2000, a person resident in India may open, hold and maintain with an Authorised Dealer in India, a Foreign Currency Account to be known as Exchange Earners’ Foreign Currency (EEFC) Account, subject to the terms and conditions of the Exchange Earners' Foreign Currency (EEFC) Account Scheme specified in the Schedule to the said notification.

1. Subsequently, as a part of continuous process of rationalisation and simplification of procedures and further liberalisation of the existing regulations relating to exports, the Reserve Bank of India issued two Press Releases (copies enclosed) as detailed under to announce rationalisation/liberalisation of EEFC Account Scheme.

1. Press Release : 2002-2003/172 dated August 15, 2002 : The Reserve Bank has permitted individual professionals to keep up to 100 per cent of their foreign exchange earnings from consultancy and other services rendered to persons or bodies outside India, in their foreign exchange earners’ foreign currency (EEFC) account. The facility has been permitted for the benefit and convenience of individual professionals, lawyers, doctors, artists, architects, engineers, consultants, cost/chartered accountants, directors on boards of overseas companies, etc.
2. Press Release : 2002-2003/265 dated September 6, 2002 : As a further measure towards giving boost to the export oriented units and rationalisation of the EEFC Account Scheme, it was decided that there wFould only be two categories of EEFC Account holders. One, those who can retain upto 100 per cent of their receipt in foreign exchange and others who can retain upto 50 per cent of their receipt in foreign exchange. Accordingly, a 100 per cent Export Oriented Unit (EOU) or a unit situated in (a) Export Processing Zone (EPZ) or (b) Software Technology Park (STP) or (c) Electronic Hardware Technology Park (EFTP), are eligible to credit upto 100 per cent of their foreign exchange receipts to their EEFC Account, against the existing eligibility of credit upto 70 per cent.

2. Pending issue of the notification amending the existing Regulations framed under Foreign Exchange Management Act, 1999, Authorised Dealers were advised to forward the applications in respect of (i) and (ii) above, to the regional offices of the Foreign Exchange Department of the Reserve Bank.

3. Government of India has since notified the above liberalisations, vide Notifications No.FEMA.69/2002-RB dated August 26, 2002 [G.S.R.755(E) dated November 8, 2002] and No.FEMA.92/2002-RB dated June 7, 2003 [G.S.R.11(E) dated January 7, 2004] (copies enclosed). Accordingly, it will be in order for Authorised Dealer to extend the facility of opening, holding and maintaining EEFC Accounts as stated in the notifications, without reference to the Reserve Bank.

4. It is also brought to the notice of the Authorised Dealers that in "Amendment of the Regulations" in Notification No.FEMA.92/2003-RB dated June 7, 2003, item No. has been erroneously stated as "2" instead of "3". Authorised Dealer may, therefore, read the item No. as "3". Necessary corrigendum to effect this change is being issued separately.

5. Authorised Dealers may bring the contents of this circular to the notice of their constituents concerned.

6. The directions contained in this circular have been issued under Sections10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999)

Yours faithfully,

Grace Koshie

Chief General Manager

EEFC Account Scheme for EOUs further liberalised

As a part of continuous process of rationalisation and simplification of procedures and further liberalisation of the existing regulations relating to exporters, the Reserve Bank of India has announced rationalisation of the Exchange Earners’ Foreign Currency (EEFC) Account Scheme.

As a further measure towards giving boost to the export oriented units and rationalisation of the EEFC Account Scheme, there will now be only two categories of EEFC account holders. One, those who can retain upto 100% of their receipt in foreign exchange and others who can retain upto 50% of their receipt in foreign exchange.

Accordingly, a 100% Export Oriented Unit (EOU) or a unit situated in (a) Export Processing Zone (EPZ) or (b) Software Technology Park (STP) or (c) Electronic Hardware Technology Park (EHTP), will now, be eligible to credit upto 100% of their foreign exchange receipts to their EEFC Account, against the existing eligibility of credit upto 70%. So far, the facility of crediting upto 100% of receipts was available only to Status Holder Exporters and Professionals who rendered services in their individual capacity, to entities outside India . As a result of this liberalisation, the facility of crediting upto 100% of foreign exchange receipts to their EEFC account will now also be available to Status Holder Exporters, Professionals, 100% EOUs and units in EPZ/STP/EHTP.

Pending issue of the notification amending the existing Regulations framed under Foreign Exchange Management Act, 1999 (FEMA), the Regional Offices of the Reserve Bank will expeditiously deal with applications received with regard to the change.

Alpana Killawala
General Manager

Press Release No. 2002-2003/265