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RBI tightens norms for SEZ, reverses forex relaxation

By Religare
RBI tightens norms for SEZ, reverses forex relaxation
In wake of persistent fall in rupee, the Reserve Bank of India (RBI) has tightened norms for special economic zones (SEZs), asking them to realise and bring back full value of goods and services to India within a year from the date of export.

The move would put pressure not only on SEZ units, but also on their clients abroad to make faster payments. The new initiative would end a decade-old exemption under which there was no prescription of any time limit for realisation of exports made by the units in SEZs.

Before April 2003, SEZs were required to get their earnings back within one year, but under the new SEZ Policy which came into being from 2006, no clear indication was made as to when the value should be realised.

"RBI has done this to ensure the money comes into the country within time. The units were apparently sitting on the money and working on long-term credit, which has now changed. It used to take anywhere from five months to five years for forex to come into the country. There was a certain rule in the policy but it was never indicated clearly, so we asked RBI this time to bring in more clarity, and hence the notification," said a commerce department official.

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