What changed
Previously, EEFC and RFC accounts could only be held by the resident individual alone. Now, a resident close relative (as defined in the Companies Act, 1956) can be added as a joint holder on a 'former or survivor' basis, but without operating rights during the account holder's life.
What it means for you
Banks must update their account opening procedures to allow adding a close relative as a joint holder in EEFC/RFC accounts. This change simplifies succession planning for customers but requires careful handling of operating restrictions. AD banks need to ensure compliance with the 'former or survivor' basis and non-operation clause.
What you must do
- Update internal systems and forms to permit adding a resident close relative as joint holder in EEFC/RFC accounts.
- Ensure the joint holder is a 'close relative' as per the Companies Act, 1956 definition.
- Implement the 'former or survivor' basis and restrict the joint holder from operating the account during the account holder's lifetime.
- Communicate the new facility to existing and prospective EEFC/RFC account holders.
Who it affects
Authorised Dealer (AD) banks handling EEFC/RFC accounts, Resident individuals holding or opening EEFC/RFC accounts, Resident close relatives of such account holders
Can the joint relative operate the EEFC/RFC account while the account holder is alive?
No, the circular explicitly states that the resident close relative joint holder shall not be eligible to operate the account during the lifetime of the resident account holder.
What is the definition of 'close relative' for this purpose?
The circular refers to the definition in Section 6 of the Companies Act, 1956. Banks should verify that the joint holder qualifies under that definition.
Does this circular apply to both EEFC and RFC accounts?
Yes, the liberalisation applies to both Exchange Earners Foreign Currency (EEFC) accounts and Resident Foreign Currency (RFC) accounts.