Foreign accounts mean an account that is held by the custodian for the benefit of clients and accounts designated for each beneficial owner as required under the regulatory jurisdiction where the foreign account is established. Report of Foreign Bank and Financial Accounts (FBAR) requires reporting concerning financial accounts “in a foreign country”, where the foreign country is defined as the geographic area that is located outside the own country. A Foreign Currency Account (FCA) is a transactional account that is denominated in a currency other than the home currency and can be maintained by a bank account in the home country. FACTA is The Foreign Account Tax Compliance Act, RBI has made FACTA declaration mandatory for all bank account holders in India. It is a tax information reporting regime that requires Financial Institutions(FIs).

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What are the different types of foreign accounts?

 In India, four types of foreign accounts are regulated under the FEMA. They are;

• EEFC - Exchange Earner’s Foreign Currency

• RFC - Resident Foreign Currency account

• RFC(D) - Resident Foreign Currency (Domestic) account

• DDA - Diamond Dollar Account

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EEFC (Exchange Earner’s Foreign Currency)

• An EEFC is one of the other type of foreign accounts that is a non-interest-bearing current account that allows Indian exporters to hold and manage foreign currency earnings without converting them into Indian Rupees.
• It served as an invaluable tool for customers including exporters navigating complexities of international trade and foreign exchange transactions.
• All categories of foreign exchange earners, such as individuals, companies, etc., who are resident/s of India.
• EEFC accounts offer a valuable solution for businesses dealing in  International transactions by minimizing currency conversions, simplifying vendor payments, and enhancing financial payments.

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EEFC Features and Benefits

• Cost saving through reduced currency conversions
• Simplified vendor payments
• Enhanced financial management
• Access to foreign exchange facilities

RFC (Resident Foreign Currency)

• An RFC (Resident Foreign Currency) is a type of foreign account that allows Non-Resident Indians (NRIs) who have returned to India to settle there to maintain their foreign accounts permanently.
• It helps the NRIs to save their foreign money in their home country.
• An RFC in India must pay the interest earned on your RFC account, regardless of the source of income.
• An RFC account can be held in a term deposit, savings, or current account form maintained for 1 year to 3 years.

RFC Features and Benefits

• Currency flexibility
• Interest earnings
• Easy access
• Repatriation
• Investment opportunities

RFC(D) Resident Foreign Currency (Domestic) 

• A Resident Foreign Currency (Domestic), this types of foreign Accounts is a bank account that allows Indian residents to save foreign currency in their home country.
• It is an account with a balance held in foreign currency, which helps in getting forex in the form of cash, traveler’s cheques, and foreign currency DD, as per the customer's needs.
• It is also known as a single-currency account.
• The RFC account also allows for including a resident relative as a joint holder on a “former or survivor” basis.

RFC(D) Features and Benefits

• Transferability
• Interest Rates
• Deposits
• Air Lounge Access
• Online Payments
• Currency Flexibility
• Interest Earnings
• Repatriation

DDA - Diamond Dollar Account

• A Diamond Dollar Account is an account that allows companies and firms to conduct business in US dollars while importing or exporting diamonds or precious metal jewelry.
• This scheme allows firms and companies to deal in purchase or sale.
• An individual can open more than five diamond dollar accounts with their banks.
• No intra-account transfer is allowed between the DDAs maintained by the account holder.

Types of NRI Accounts

As an NRI, the person should know about the numerous forms of NRI accounts that come under the types of foreign accounts;

• Non-Resident External (NRE) Savings Account/ Fixed Deposit Account
• Non-Resident Ordinary (NRO) Savings Account/ Fixed Deposit Account
• Foreign Currency Non-Resident (FCNR) Fixed Deposit Account

Non-Resident External (NRE)

• NRE Accounts are mentioned as savings accounts/fixed deposit accounts which means that the money in the NRE account the foreign currency is converted to Indian rupees.
• NREs fixed deposit tenures can range from one year to ten years.
• The benefit of this type of foreign account is that the principal amount, as well as the interest, are completely repairable.
• The interest rate is higher in this account than other local accounts and can be easily opened on the internet.

Non-Resident Ordinary (NRO)

• NRO are an excellent option to earn high returns, like those offered to resident Indians.
• The existing domestic account of the resident gets converted to an NRO account on their taking up business/employment/immigration board.
• These accounts are for Non-Resident Indians who need accounts to credit local dues like rent from property.
• A Non-Resident Ordinary (NRO) Account is a type of account for many Non-Resident Indians (NRIs) to manage their deposits or income earned within India such as pension, rent, dividend income gifts, and proceeds from the sale of immovable property.

Foreign Currency Non-Resident (FCNR)

• FCNR is only a fixed deposit account that is opened by non-resident citizens and has to be opened and maintained in foreign currency.
• This account helps to maximize returns on your foreign currency investments and protects you from foreign currency exchange fluctuations while securing attractive and assured returns.
• FCNR accounts protect against currency exchange rate fluctuations, making them a secure choice for long-term savings.
• The Foreign Currency Non-Residential-Bank (FCNR-B) Account stands out as a secure and advantageous option for individuals looking to park their foreign earnings, its unique features, including multi-currency options, fixed tenures, attractive interest rates, and easy repatriation, make it an appealing choice for NRIs and PIOs.

Winding up

In this, I have covered the meaning of foreign accounts and the types of foreign accounts that will be useful for students pursuing accounting and financial subjects and also for those who are preparing for competitive exams and other financial exams.

Types of foreign accounts - FAQ’s

Q. What are the different types of Foreign accounts?

The different types of foreign accounts, are.,

• Non-Resident External (NRE) Savings Account/ Fixed Deposit Account
• Non-Resident Ordinary (NRO) Savings Account/ Fixed Deposit Account
• Foreign Currency Non-Resident (FCNR) Fixed Deposit Account.

Q. What were the special features of foreign accounts?

A foreign currency account is known as a borderless account, The features of foreign accounts are that an account holder can transfer, receive, and save money in several currencies with ease.

Q. What is an NRI account called?

A Non-Resident Indian (NRI) Account is essentially a banking service provided for Non-Resident Indians (NRIs) or Persons of Indian Origin (PIOs). These accounts are set up with banks or financial institutions that have received authorization from the Reserve Bank of India (RBI).

Q. What is an example of a foreign account?

Some important foreign accounts are

• Herodotus,
• The Erythraean Sea's Periplus,
• Megasthenes,
• Fa-Hien,
• Hiuen-Tsiang,
• Al-Masud,
• Alberuni

Q. What is the current account in the foreign account?

The current account represents a country's imports and exports of goods and services, payments made to foreign investors, and transfers such as foreign aid.