Govt may allow foreign banks to operate in SEZs

NEW DELHI: The government may throw open the Special Economic Zones to all banks, irrespective of whether they are licensed to operate in India or not. Earlier, the government was planning to permit only banks licensed to operate in India to function as Overseas Banking Units (OBUs) in the SEZs. This relaxation is being considered to make SEZs attractive to foreign investors. Besides, the argument is that when exporters can raise export finance from any bank in the international market, irrespective of whether they are registered in India or not, the same facility should be available to units in the SEZs. Further, the OBUs would be exempt from Cash Reserve Ratio, Statutory Reserve Ratio requirements. Also SEZ units and SEZ developers will gain access to international finances at international rates. The aim is to make the cost of funds competitive for exporters. The RBI is expected to issue a notification to allow OBUs to operate in SEZs within the next few days. Commerce and industry minister Murasoli Maran had announced the setting up of OBUs in SEZs in the five-year Exim policy announced on March 31. Domestic SEZs are modelled on the lines of Chinese SEZs. In the Chinese free trade zones, units enjoy the freedom to deal in any currency and the right to hire and fire. Though dealing in multiple currencies is envisaged in the Indian model, SEZs may not be allowed a labour policy different from the national model. As per the Exim policy announcement, the OBUs will be virtually foreign branches of Indian banks but located in India.