How can you manage your foreign currency once you intend to shift back to India from Abroad? In this article, let’s understand an RFC account and who can open one.
What is an RFC- Resident Foreign Currency Account?
The Reserve Bank, per the Foreign Exchange Regulation Act, has approved that eligible persons residing in India may hold foreign exchange in a bank account with any authorized dealer. An RFC account is expressed in any permitted currency eligible persons can open and maintain under this scheme with any authorized dealer. The term “permitted currency” refers to any foreign currencies in which authorized dealers can preserve balances abroad.
‘Authorized dealer’ refers to a person currently approved by the Reserve Bank under Section 6 of the Foreign Exchange Regulation Act, 1973, to deal in foreign exchange. On the other hand, an ‘Eligible person’ refers to a citizen of India or a person of Indian origin who has been residing outside India for a continuous period of not less than one year and has become a resident in India on or after 18 April 1992. The term also includes other individuals the Reserve Bank may permit as eligible to open and maintain an RFC Account.
To be considered of Indian origin, an individual must have held an Indian passport at any time or have had a parent or grandparent who was a citizen of India under the Constitution of India or the Citizenship Act (57 of 1955). It is important to note that nationals of Pakistan or Bangladesh are not considered of Indian origin. However, individuals who are spouses of Indian citizens or persons of Indian origin (who are not nationals of Pakistan or Bangladesh) are deemed to be of Indian origin.
If you have lived overseas, earned foreign currency, and now plan to return to India, you may have invested your earnings through a bank account in your country of residence. In such a case, you can easily set up a Resident Foreign Currency Account upon your return to India. This account allows you to hold and manage your foreign earnings in India without converting them to Indian Rupees.
Who can open an RFC Account?
Anyone fulfilling the eligibility criteria can open and maintain one or multiple RFC Accounts in any permitted currency with an authorized dealer in India. Before opening an RFC Account, the eligible person must apply to an authorized dealer in the form specified in the Schedule. The eligible person must sign the application form and contain all the information supported by the necessary documents.
If the applicant is eligible and the funds credited to the account represent remittances from eligible assets, an authorized dealer may open the RFC Account. The RFC Account can be held either singly or jointly in the name(s) of the eligible person(s). However, adding the names of any ineligible person(s) is not permissible. An RFC Account can be maintained as a current, savings or term deposit account.
If you are categorized under any of the three eligibility criteria below, you can set up an RFC Account.
You are classified as an NRI who has returned to India.
You were a resident outside India for 1 year or more continuously.
Since your return from overseas, you have permanently settled in India
Features of an RFC Account
An RFC Account can only be maintained in USD, GBP, and EURO. RFC Deposits can be made in four permitted currencies: USD, GBP, and EURO. If you anticipate moving back overseas, the funds in your RFC Account can be transferred to your NRE or FCNR account. Some banks offer you the option to set up your account with joint holding. However, the joint holder must be an eligible individual, such as a returning NRI or a resident relative, and must be registered on a ‘former or survivor’ basis.
The minimum tenure for an RFC Fixed deposit is 7 days, and the maximum is 3 years. According to bank policy, a chequebook is not issued for the RFC SB account. If you choose to liquidate your RFC deposit prematurely, a 1% penalty will be imposed. We can further explore the eligibility requirements now that we have established an RFC account.
It allows for certain debits and credits that are permissible, which include the following:
Credits permitted in RFC Account
‘Eligible Assets’ refers to foreign exchange assets acquired or held by an eligible person outside India (non-resident) per the Act. These assets may include deposits in foreign banks, investments in foreign currency shares or securities, immovable properties located outside India, or investments in businesses outside India. Additionally, foreign exchange earnings through employment, trade, or vocation outside India taken up or commenced by such a person while residing outside India also fall under the category of Eligible Assets.
Only the following amounts are allowed to be credited to an RFC Account:
1. Remittance in any permitted currency from outside India through normal banking channels, which represents:
i) Funds in bank accounts outside India that form part of eligible assets held by the eligible person.
ii) Income such as dividends, interest, profit, rent, etc., earned on eligible assets held by the eligible person.
iii) Sale proceeds of eligible assets.
2. Pension or other monetary benefits received from outside India, in any permitted currency, through normal banking channels, that arise out of employment taken up by the eligible person outside India before returning to India.
3. Interest earned on the RFC Account.
4. Foreign currency notes/traveller’s cheques in any permitted currency brought into India by the eligible person, provided that where the amount tendered exceeds US$ 10,000 or its equivalent, or where the value of foreign currency/bank notes exceeds US$ 2500 or its equivalent, they should have been declared on the Currency Declaration Form (CDF).
5. Transfers from other RFC Accounts of the account holder.
6. Balances in any NRE/FCNR Account in the name of the eligible person standing to his credit at the time of his arrival in India.
7. Any other amount explicitly permitted by the Reserve Bank.
Debits permitted from the RFC account
The RFC Savings Account allows you to remit funds abroad for any legitimate purpose without any limit. Additionally, you can withdraw funds in Indian rupees by transferring foreign currency from your RFC account to your Resident INR CASA account. You must have a Resident INR CASA account to use this feature. It is a mandatory requirement.
Documentation is Required to Open an RFC Account
To open an RFC Fixed Deposit Account, you must fill out the RFC fixed deposit account opening form and the RFC fixed deposit account – undertaking.
You must also provide photocopies of all applicants’ passports and personal details and a copy of your Permanent Account Number (PAN) or Form 60 (if you don’t have PAN). Additionally, provide:
A copy of the expired visa and immigration stamps showing evidence of foreign stay for at least one year (last departure and arrival page).
A passport-size photograph of all applicants.
An Indian address proof deemed OVD.
It’s important to note that the RFC Savings Account can be opened on an NIL IP basis. However, customers must open a resident CASA account while opening an RFC account.
Nomination Facility:
RFC Accounts can now be nominated, just like resident rupee accounts.
Sign up with our NRI Account services today!
Please note:
Rate of interest:
When transferring your balance to NRI accounts upon regaining NRI status, there is no need to worry about foreign exchange risk. The RFC account is specifically designed for returning NRIs to maintain foreign currency.
