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Thursday, Mar 14, 2002

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RBI rejects exporters' plea for interest on EEFC balances

Our Bureau

MUMBAI, March 13

THE Reserve Bank of India has ruled out permitting banks to offer interest on the balances held by exporters in their Exchange Earners' Foreign Currency (EEFC) account. This is because such balances are in the current account and cannot be treated as deposits.

Explaining as to why the RBI had not agreed to the exporters' request, the General Manager, RBI, Mr K. Ramasubramanian, said payment of interest would make the EEFC account an investment account.

"The EEFC account is a current account meant for trade-related payments and, therefore, payment of interest cannot be permitted on this account,'' he said.

Speaking at a seminar on International Trade Finance — The present and the future — here on Wednesday, Mr Ramasubramanian said the RBI was also revising the project export memorandum.

"The revised project export memorandum will facilitate project exporters to know the exchange control regulations in a consolidated and simple manner,'' he said.

On the retail dispensation towards foreign exchange, Mr Ramasubramanian said for all current account transactions, except those indicated under the current account rules framed by the Government, retail dispensation of foreign exchange was freely permitted.

Commenting on foreign currency accounts such as the diamond dollar account and the escrow account, he said both these accounts were yet to take off.

Diamond dollar accounts are foreign currency accounts that Indian residents can hold with authorised dealers in India for export and import of diamonds.

US$ escrow accounts facilitate the counter-trade mechanism. Overseas suppliers can use the escrow account or foreign currency current account in which the proceeds of his/her supplies made in India are credited. The account holder can use the escrow balance for import of goods permitted under the Exim Policy.

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RBI rejects exporters' plea for interest on EEFC balances
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