RBI eases project export guidelines

The Reserve Bank of India (RBI) has liberalised rules on project and service exporters' transfer of funds and machinery.

The central bank has also given more freedom to these exporters to deploy temporary surplus cash.

This is expected to benefit public sector entities such as Bhel and private companies such as Larsen & Toubro and Punj Lloyd.

The condition that such entities executing projects abroad should recover market value of equipment/machinery used from projects to which the machinery is transferred, has been withdrawn, the RBI said.

Now these exporters can use the machinery/ equipment for any other contract in any country subject to the satisfaction of the banks or Exim Bank.

At present, such companies have to dispose of the equipment/ machinery/ vehicles purchased abroad and/or import them to India after completion of the contracts.

The central bank has also relaxed condition for inter-project transfer of funds. Now, banks can permit exporters to open, maintain and operate foreign accounts in currency/currencies of their choice for inter-project transfer of funds in any country/currency.

At present, the project/ service exporters have to maintain a single foreign currency account for more than one project being executed in the same country.

Further, they need approvals from the bank that monitors project to use temporary inter-project transfer facility to meet cash flow deficits.

They can now deploy their temporary cash surpluses, generated outside India, in short-term paper abroad including treasury bills and other monetary instruments with a maturity or remaining maturity up to one year.

Such financial instruments must carry at least rating - A-1/AAA by Standard & Poor or P-1/Aaa by Moody's or F1/AAA by Fitch IBCA etc. They can also park the temporary surplus cash with overseas branches / subsidiaries of bank in India.