Regulations 1 to 4 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Regulation 3 says a person resident in India may not open, hold or maintain a foreign currency account unless the Act, rules or regulations allow. Regulation 4 is the list of foreign currency accounts a resident may hold in India: the EEFC account, the RFC accounts, the SEZ unit account, the Diamond Dollar Account and a set of other cases. The Master Direction on Deposits and Accounts (Part I) states each account's conditions, and this article states them as the Master Direction prints them.
This article reads the Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015 (Notification No. FEMA 10(R)/2015-RB, January 21, 2016, amended upto February 27, 2019) for structure, as per the copy from the Enforcement Directorate site, with the Fifth, Sixth and Seventh Amendments of 2025. Every condition is taken from the Master Direction - Deposits and Accounts, updated as on September 02, 2026. The EEFC account takes hundred per cent of foreign exchange earnings by inward remittance, is non-interest bearing and accruals must be converted into rupees by the end of the following month, after adjusting for approved utilisation. The RFC, RFC(D), Diamond Dollar and other accounts have their own credits and debits. Later changes should be checked.
Authority and the texts
The preamble cites "Section 9 and clause (e) of sub-section (2) of section 47" of the Foreign Exchange Management Act, 1999. See the Act articles on section 9 and sections 47 and 48. The Master Direction's cover letter says opening, holding and maintaining foreign currency accounts by a resident is regulated "in terms of section 9" read with these Regulations, and the Master Direction is the Reserve Bank's direction to authorised dealers under section 11. The copy of the Regulations is amended upto February 27, 2019 only; the Third and Fourth Amendments (footnoted on the amendment pages as dated 23.04.2024 and 21.11.2024) are not in the sources consulted. The Fifth Amendment (January 14, 2025), Sixth Amendment (April 29, 2025) and Seventh Amendment (October 06, 2025) are. Where the copy has a condition that the Master Direction does not print, it is left out. For advice on foreign currency accounts, see our FEMA advisory service.
Regulations 1 to 3: title, definitions and the ban
Regulation 1 gives the title and brings the Regulations into force from publication. Regulation 2 defines "Foreign Currency Account" as an account held or maintained in currency other than the currency of India or Nepal or Bhutan; the Seventh Amendment added a definition of IFSC. Regulation 3 bars a resident from opening, holding or maintaining a foreign currency account save as the Act, rules or regulations allow. Two provisos: an account held before commencement with the Reserve Bank's special or general permission is deemed held under the Regulations, and the Reserve Bank may on application permit a resident to hold an account on conditions. Paragraphs 1.2 and 1.3 of the Master Direction add that such an account can continue, and that a resident may keep a foreign currency account outside India if he held it when resident outside India or inherited it from a non-resident.
Regulation 4 and Schedule I: the EEFC account (Master Direction paragraph 3.1)
| Item | As the Master Direction prints it |
|---|---|
| Credits | Hundred per cent of foreign exchange earnings by inward remittance through normal banking channel (other than loans or investments); counter trade payments; advance remittance received by an exporter; professional earnings (director's, consultancy, lecture fees and the like); interest on the account; re-credit of unutilised foreign currency earlier withdrawn; repayment of trade related loans or advances granted to an importer customer out of the account; disinvestment proceeds on conversion of shares to ADRs or GDRs under the DR Scheme, 2014; payments received in foreign exchange by an Indian startup from its sales or its overseas subsidiaries' sales |
| Debits | Payments outside India for capital or current account transactions under the Permissible Capital Account Transactions Regulations, 2000 and the Current Account Transactions Rules, 2000; payment for goods bought from a hundred per cent Export Oriented Unit or a unit in an Export Processing Zone, Software Technology Park or Electronic Hardware Technology Park; customs duty; trade related loans or advances by an exporter to an importer customer outside India; payment to a resident for goods or services including air fare and hotel expenditure |
| Rupee withdrawals | Permitted, but the amount withdrawn cannot be re-credited |
| Interest | Non-interest bearing |
| Conversion | The month's accruals converted into rupees on or before the last day of the succeeding calendar month after adjusting for approved utilisation or forward commitments |
| Facilities | No fund or non-fund based credit against balances; packing credit advances can be repaid from the account to the extent exports have taken place |
| ECGC claims | Claims settled in rupees by ECGC or insurers are not export realisation and not an eligible credit |
| Residential status | Balances may be credited to NRE or FCNR(B) accounts on change from resident to non-resident |
Regulation 6 (types of accounts) adds that an account may be a current, savings or term deposit account for an individual and a current or term deposit account in other cases (paragraph 5.1 of the Master Direction says the same), held singly or jointly (5.2); the EEFC account is kept as the Reserve Bank prescribes.
Regulation 4(B) and 4(C): RFC and RFC(D) accounts (paragraphs 3.2 and 3.3)
RFC account. A resident may open an RFC account with an AD bank out of foreign exchange received as pension, superannuation or other monetary benefits from an overseas employer; by converting assets acquired when a non-resident or inherited or gifted by a non-resident and repatriated to India; acquired before July 8, 1947 or income on it, held outside India under the Reserve Bank's permission; or received as proceeds of life insurance claims, maturity or surrender value in foreign exchange. Balances carry no restriction on utilisation of foreign currency outside India (paragraph 3.2(2)). A joint account is possible with a resident relative on "former or survivor" basis, but that relative cannot operate it during the holder's lifetime. NRE and FCNR(B) balances can be credited to the RFC account when an NRI or PIO becomes resident.
RFC(D) account. A resident individual may keep, in a bank account in India, foreign exchange acquired as currency notes, bank notes and travellers cheques from overseas sources such as payment for services during a visit abroad not arising from business or anything done in India, honorarium or gift, gift from a relative, unspent foreign exchange acquired from an authorised person for travel, ADR or GDR disinvestment proceeds, and life insurance proceeds in foreign currency. Accruals in a month are converted into rupees by the end of the succeeding month after adjusting for approved utilisation; balances can be used for any current or capital account transaction under the Current Account Transactions Rules and the Permissible Capital Account Transactions Regulations; and credited to NRE or FCNR(B) on change of status.
Regulation 4(D) to (G): SEZ unit, Diamond Dollar and other accounts
- SEZ unit (3.10). A unit may keep a foreign currency account to credit all foreign exchange funds it receives; for bona fide trade transactions between the unit and a person resident in or outside India; foreign exchange bought in India against rupees cannot be credited without the Reserve Bank's prior permission; funds cannot be lent or made available to anyone resident in India who is not an SEZ unit. The sentence about restrictions under Rule 5 of the Current Account Transactions Rules is printed with a word missing on the page, so it is not restated.
- Diamond Dollar Account (3.4, Schedule II). Firms and companies meeting the Foreign Trade Policy criteria may open one. Realisation of export proceeds and local sales (in USD) of rough, cut and polished diamonds, and pre and post shipment finance in USD can be credited; payments for purchase of such diamonds can be made and funds transferred to the exporter's rupee account; it is a non-interest bearing current account; accruals are converted into rupees by the end of the succeeding month after adjusting for approved utilisation. The Sixth Amendment (April 29, 2025) changed the first paragraph of the Annex "Application for Opening Diamond Dollar Account/s" by substituting "three years" for "2 years".
- Exporters (3.9). An exporter with a construction contract, turnkey project, or exports of services or engineering goods on deferred payment terms may keep a foreign currency account with a bank in India, if the approval required under the export regulations named in the paragraph is obtained and the approval's terms are complied with.
- Other cases. An Indian agent of a foreign shipping or airline company (3.5); ship-manning or crew managing agencies (3.6); project offices (3.7: one account per project, closed at completion); organisers of international seminars and conferences (3.8: temporary, closed after the event); an Indian company receiving FDI that has impending foreign currency expenditure, with the account closed on completion or within six months, whichever is earlier (3.11); and re-insurance and composite insurance brokers (3.12).
Regulations 7 and 8: death of the holder and the bank's duties
On the death of an account holder, the authorised dealer may remit to a non-resident nominee his share or entitlement; a resident nominee who wants to remit funds abroad to meet the deceased's liabilities abroad may apply to the Reserve Bank; and a resident nominee of an account held outside India must close it and bring the proceeds back through banking channels (regulation 7; Master Direction paragraph 5.3). Regulation 8 requires the authorised dealer to follow the Reserve Bank's directions and submit any periodic return or statement the Reserve Bank stipulates. Paragraph 15 of the Master Direction (printed in Part II) states the same duty for accounts maintained under the Master Direction.
Example
Zenith Gems Exports Pvt Ltd, an invented exporter, credits hundred per cent of its inward export remittances to an EEFC account. In April it receives export proceeds and in the same month pays a supplier in foreign exchange and an air fare to a resident travel agent; both are permitted debits. Any balance remaining from April's accruals must be converted into rupees on or before 31 May. It cannot take a packing credit or other facility against the balance, though it can repay packing credit advances from it to the extent exports have taken place. Money borrowed abroad does not qualify as a credit because loans and investments are excluded.
Our article on resident foreign currency accounts held outside India takes up regulation 5, and the earlier articles on NRI accounts explain the NRE and FCNR(B) accounts to which balances may move. For export terms see our guide on export finance terms such as EEFC. Later amendments and circulars should be checked.
Need help with foreign currency accounts?
Which account fits depends on the source of the funds and the intended use, and the conversion deadline is easy to miss. Our FEMA advisory team can map the account, the credits and the reporting.
Key takeaways
- Regulation 3 bars a resident from holding a foreign currency account unless the Act, rules or regulations allow it.
- EEFC: hundred per cent of earnings by inward remittance, non-interest bearing, monthly accruals converted by the end of the next month after adjustments.
- RFC and RFC(D) have their own sources of funds and carry no restriction on use as the Master Direction states.
- SEZ units, Diamond Dollar accounts, exporters on deferred terms, shipping agents, project offices and others have separate paragraphs.
- Conditions found only in the copy of the Regulations are left out.
Read next
- Foreign currency accounts outside India: regulation 5
- NRO, SNRR, escrow and company deposits: Schedules 3 to 7
- Export finance terms: nostro, vostro, EEFC and more
- Export of goods and services under FEMA
Disclaimer: Based on the rules, regulations and Reserve Bank Master Directions under the Foreign Exchange Management Act, 1999 that this article names, each in the version and up to the date stated in the article, as consulted on 2 October 2026. Some texts are third-party copies or older prints and are identified as such. Limits, forms and time limits change by amendment and circular; later changes should be checked on the Reserve Bank and Gazette sites. This article is general information, not legal advice; check the official text before acting.