Globalization made dealing with different countries easy and efficient, and with increasing amount of business transactions foreign exchange of currencies began to expand.
With banking sectors recognising the need, foreign currency accounts came into existence, foreign currency account (FCA) is an account in which a person can hold money which is in different currency than that of one’s own countries currency. Any person who is residing in India can open and maintain their own foreign currency account. These accounts can be beneficial for business persons who deal with international clients and suppliers or for the travellers who often travel in different countries, etc.
Foreign currency accounts make inter currency transactions easy and efficient and promotes import export between different countries.
The Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015 regulates the foreign currency accounts opened in India.
ADVANTAGES OF HAVING FOREIGN CURRENCY ACCOUNT:
having a foreign currency account can be beneficial for a lot of reasons which are as follows:
- While travelling to another country having foreign currency accounts helps because we can have access to the account in different countries with their respective currencies.
- It is useful for making purchases in different countries.
- Helps in business as it becomes easy to make payment and receive payment in different currencies.
- Easy process of conversion in different currencies.
- Reduces currency risk.
- It can hold multiple currencies.
DISADVANTAGES OF HAVING FOREIGN CURRENCY ACCOUNT:
- Not all country currencies are provided in foreign currency accounts.
- It provides low rate of interest on funds.
- Change in the value of currency can affect your bank balance.
- They charge fees on transaction made.
TYPES OF FOREIGN CURRENCY ACCOUNT:
- Non-resident ordinary accounts – when an Indian citizen goes abroad for any kind of job or employment his/her bank account automatically gets converted into non-resident ordinary account. It can be opened with foreign earned money or with Indian rupee. Funds in these accounts can be utilized in India and can be kept in the form of saving accounts, fixed deposit and recurring deposit account. People who are non-resident of India and who are not of the Indian origin can also maintain non-resident ordinary accounts.
- Non-resident external rupee account – this account can be only opened with money received from abroad and not with the Indian rupee. There can be joint holder to the account but not with residents. The joint account holder should also be a non-resident. The funds held in the account can be freely repatriated outside India without limit and without any approval from RBI. Since the account is maintained in rupee, for repatriation purpose the Rupee will be converted into the desired foreign currency at the prevailing rate of exchange. Interest earned on the account is free from income tax. The account can be maintained as savings bank account, fixed deposit, recurring deposit, etc. The fixed deposit account should be for a minimum period of one year and for a maximum period of 3 years.
- Foreign currency non-resident account – FCNR Accounts are term deposit accounts. They can be maintained in four currencies: US Dollar, Pound Sterling, and Japanese Yen. Presently it can be maintained in the new European Currency “Euro” also. They can be maintained for period ranging from one year to 3 years. They are paid back in the same currencies and are reparable. The account is maintained in foreign currency and paid back in the same currency. Hence, there is no conversion of currency when balance is repatriated outside India.
- Resident foreign currency account – These are accounts of resident individuals, who had come back to India after being abroad as NRIs for some time. He/she may sell his foreign assets like securities, property etc., at the time of return to India. This foreign exchange can be used to open the RFC accounts. These accounts can be maintained in any foreign currency of the choice of depositors. No permission from Reserve Bank is necessary for maintaining this account.
- Resident foreign currency (D) account – RFC (D) account can be maintained by any resident individual even when he had not been abroad at any time. One can open a foreign currency account with a bank in India out money received from your relatives living outside India.
- Exchange earners foreign currency accounts – These accounts can be maintained by residents who happen to receive money from abroad in foreign currency. This account can be opened by individuals or corporates. One important difference between this account and the RFC account is that the EEFC account can be opened only out of foreign exchange earned.
CURRENCIES AVAILABLE IN FOREIGN CURRENCY ACCOUNT:
- US dollar
- Euro dollar
- British pound
- Japanese yen
- New Zealand dollar
- Fees for opening account.
- Monthly account keeping fees.
- Charges for currency coming in.
- Charges when money is sent.
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