As per the Foreign Exchange Management Act, 1999 (FEMA), a resident Indian cannot hold foreign currency beyond specified limits. However, the Reserve Bank of India (RBI) has allowed resident Indians to hold bank accounts denominated in foreign currency if they fulfil certain conditions. Such bank accounts are called RFC (Resident Foreign Currency) accounts. The account holder may hold the account in any of the specified freely convertible foreign currencies, including US Dollar (USD), Pound Sterling (GBP), Japanese Yen (JPY), etc. Such accounts carry no restrictions on the utilization of the account balance, including making investments abroad. The resident Indians can also use these accounts if they plan to relocate overseas after staying in India for some time.
Eligibility to open RFC accounts
Any individual of Indian nationality or origin, who has been a non-resident for at least one year and has become an Indian resident, can open an RFC account. Such accounts can be opened and maintained with any of the Authorized Dealer Banks (AD Banks) in India. Further, any individual who has stayed abroad for less than one year may also apply to RBI for permission to open such accounts. Since such accounts are denominated in foreign currency, RFC accounts find their utility for the account holders to hedge their future foreign currency expenses, like children’s education expenses, etc.
How to open an RFC account?
An eligible resident Indian can open an RFC account with any of the AD Banks in India, such as ICICI Bank. Such accounts can be opened as a current account, savings account or term deposit account. One can visit any of the ICICI Bank branches in India to open an RFC account. Along with the duly-filled account opening form, the following documents are required for KYC (Know Your Customer) compliance:
- For Non-Resident Indians (NRIs) – Self-attested photocopies of current passport (containing name, address, date of birth, date and place of issue, expiry date, photo, signature), expired work permit/ employment visa, current Indian address proof. (View list of accepted Indian and overseas address proofs)
- For Persons of Indian Origin (PIOs) – Self-attested photocopies of current passport (containing name, address, date of birth, date and place of issue, expiry date, photo, signature), Indian work/ Resident visa, Current Indian address proof, PIO / OCI card or Past Indian passport of self/ spouse/ parent / grand-parent along with a self-declaration about Indian origin or self-declaration for PIO as given on the Relationship Form.
Funding an RFC Account
An account holder may fund a new RFC account through any of the specified modes, such as those listed below:
- Remittances from abroad in foreign currency through eligible modes, which may be out of existing balances in foreign bank accounts, sale proceeds of foreign assets, foreign income such as dividends, rent, etc.
- Pension or other benefits received on employment outside India before the return and received in foreign currency through eligible modes
- Transfers from other RFC accounts held by the account holder
- Transfer from NRE/ FCNR accounts held by the account holder when they were non-resident
Nomination of RFC Accounts
The account holder can nominate an RFC account in favour of either a resident or a non-resident. In case of any unfortunate event, the account balance is paid to the nominee in Indian rupees if the nominee is a resident and remitted abroad if the nominee is a non-resident.
Pledging the balance in such RFC accounts
Since RBI allows only specified resident Indians to open RFC accounts, the balance in RFC accounts cannot be pledged against any loan/overdraft by any bank or financial institution.
Non-Resident Indians (NRIs), planning to return to the homeland, can use RFC accounts to maintain foreign currency balances conveniently as and when they return to India.