In what can be seen as a move towards the capital account convertibility, the Reserve Bank of India (RBI) has announced a slew of modified norms adding facilities the exports in the area of projects and services on forex front. From now on, the authorised dealers Category-I banks, Exim Bank and other working group may permit exporters to open, maintain and operate one or more foreign currency account/s in a currency/currencies of their choice with inter-project transferability of funds in any currency or country.

Norms Are

• The authorised dealers Category-I banks, Exim Bank and other working group may permit exporters to open, maintain and operate one or more foreign currency account/s in currencies of their choice with inter-project transferability of funds in any currency or country
• Earlier project/service exporters, as specified in the PEM October 2003, were allowed to maintain a single foreign currency account for more than one project.

However the inter-group transfers will be monitored by them. Previously, project/service exporters, as specified in the Project and Service Exports (PEM) October 2003, were allowed to maintain a single foreign currency account for more than one project.

Another measure taken by RBI is towards deployment of temporary cash surpluses by the project/service exporters. Now they can deploy their excess cash in the deposits of overseas branches/subsidiaries of AD Category-I banks, short-term paper abroad including treasury bills, the rating of which should be at least A-1/AAA by Standard & Poor's or P-1/Aaa by Moody's or F1/AAA by Fitch IBCA, etc.
 
Finally, exporters will now be able to execute another project after completing previous one subject to the satisfaction of the sponsoring entity. RBI has also withdrawn the stipulation regarding recovery of market value (not less than book value) of the machinery, etc., from the transferee project with immediate effect.

Prior to the modification, exporters executing turnkey / construction contracts abroad were required to dispose off the equipment, machinery, vehicles, etc, purchased abroad and / or to arrange their import into India after completion of the contracts. In case, the machinery, etc., is to be used for another overseas project, the market value (not less than book value) should be recovered from the project to which equipment/machinery has been transferred. The reporting requirement for transfer of machinery/equipment will continue as hitherto, and would be monitored by sponsoring entity.