The SEZ account is not an unrestricted group treasury pool
An SEZ unit may hold a foreign-currency account with an authorised dealer in India under FEMA Foreign Currency Accounts Regulations, regulation 4(D). The funds are for bona fide trade transactions of the unit. Foreign exchange purchased in India against rupees cannot be credited without prior RBI permission. Funds cannot be lent or made available in any manner to a resident person or entity that is not an SEZ unit. These conditions remain distinct even where ownership and treasury management are common.
The RBI Master Direction—Deposits and Accounts, updated 2 September 2026, paragraph 3.10 summarises the route. This article is checked on 24 October 2026. It addresses account controls, not the full SEZ approval regime, export documentation, borrowing rules or income-tax incentives.
Track the unit and the origin of each credit
| Movement | Main test | Evidence |
|---|---|---|
| Foreign-exchange receipt | Does the foreign exchange belong to the approved unit? | Unit identity and receipt documents |
| Purchase against rupees in India | Is prior RBI permission available before credit? | Permission and exact funding trail |
| Trade debit | Is it a bona fide trade transaction of the unit? | Contract, invoice and counterparty |
| Treasury transfer | Is this lending or making funds available to a resident non-SEZ entity? | Recipient status and purpose review |
The regulation provides for all foreign-exchange funds received by the SEZ unit to be credited to the account. It does not permit an unrelated domestic division to route its money through the unit merely to obtain foreign-currency banking benefits. Identify the holder, the unit and the legal source. A foreign-currency label on money acquired against rupees does not erase its origin.
Distinguish a trade settlement from accommodation of another entity
The permitted trade purpose includes transactions with persons resident in or outside India. A supported payment for actual supplies to the unit is different from giving a domestic parent access to a surplus balance. Document delivery, liability and payment linkage. An intercompany loan, temporary accommodation or treasury sweep cannot be justified merely by saying that the recipient will repay it soon.
The prohibition’s reference to resident entities not being SEZ units must not be reversed into blanket authority for any loan to another SEZ unit. The recipient’s SEZ status may remove that particular non-SEZ description, but the proposed transaction still requires an independent permissibility analysis, including the account’s purpose and other applicable rules.
Read the limited relaxation narrowly
Regulation 4(D)(d) addresses the Rule 5 restrictions and expressly preserves the Schedule III item it identifies. It is not a general exemption from FEMA, from every current-account rule, or from the account’s trade-use and domestic-funding restrictions. Do not apply an individual’s LRS limit as though the SEZ company were an individual, or invent a gift allowance from a surplus account balance.
Reconcile available currency and approved uses
Maintain separate columns for opening currency, eligible receipts, permission-dependent funding, supported payments and closing balance. A rupee equivalent is useful for accounts, but compliance must follow the underlying currency and transaction trail. An internal forecast is not bank permission. Where a proposal fails the account conditions, examine another lawful route with the authorised dealer rather than disguising it as a trade payment.
All six cases use USD and assume genuine unit receipts and supported trade expenses unless the illustration expressly tests an exception. No automatic permission, exchange rate or tax treatment is inferred from the arithmetic.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: Basic trade cycle
Opening USD20,000 plus unit foreign-exchange receipts USD80,000 less supported trade payments USD65,000 gives USD35,000 closing balance. Link each movement to the unit rather than relying only on a consolidated group bank report.
Illustrative example 2: Rupee purchase is a separate category
A unit expects USD60,000 of genuine receipts and proposes buying USD25,000 in India against rupees for credit. The forecast total is USD85,000, but the purchased USD25,000 cannot be treated as an unrestricted eligible credit without prior RBI permission. A currency forecast does not establish that permission.
Illustrative example 3: Non-SEZ parent sweep
The balance is USD100,000 and treasury proposes lending USD30,000 to a resident domestic parent that is not an SEZ unit. Arithmetic would leave USD70,000, but the proposed lending falls within the stated restriction. Availability of the balance is not authority to lend it.
Illustrative example 4: Domestic and overseas trade payments
Assume properly supported bona fide unit trade liabilities of USD15,000 to an Indian supplier and USD22,000 to an overseas supplier, both independently permissible under applicable rules. Total planned trade debit is USD37,000. Resident counterparty status alone does not turn a genuine trade settlement into a treasury loan.
Illustrative example 5: Reconcile timing differences
Opening USD45,000 plus a verified USD5,000 unit receipt less USD18,000 supported payment gives USD32,000. An invoice still unpaid should remain in the commitment schedule; it must not be deducted from the bank balance a second time as though already settled.
Illustrative example 6: Separate free balance from proposals
A USD90,000 balance has USD25,000 of supported near-term trade commitments and a proposed USD15,000 loan to another SEZ unit. The numerical residual would be USD50,000. The loan is still a proposal requiring independent permissibility review; the recipient’s SEZ status is not automatic approval.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Identify the approved unit and account holder | SEZ unit and banking records |
| 2 | Ground the regulation and current directions | Regulation 4(D) and paragraph 3.10 |
| 3 | Map every receipt to the unit | Contract, remitter and invoice evidence |
| 4 | Flag forex purchased against rupees in India | Source-of-funds trail |
| 5 | Verify prior RBI permission where required | Permission terms before credit |
| 6 | Substantiate each trade payment | Underlying liability and supply documents |
| 7 | Screen resident non-SEZ treasury access | Recipient status, loans and sweep instructions |
| 8 | Review any other proposed use independently | Purpose and applicable FEMA analysis |
| 9 | Reconcile actual and committed currency separately | Bank and forecast movement schedules |
| 10 | Resolve exceptions with the authorised dealer | Written decisions and completed correction evidence |
Sixteen practitioner FAQs
1. Who is eligible for this account route?
A unit located in an SEZ, under the conditions of regulation 4(D).
2. Is it an account outside India?
The route discussed is with an authorised dealer in India.
3. Can unit foreign-exchange receipts be credited?
The regulation provides for the unit’s foreign-exchange funds to be credited, subject to its conditions.
4. Can rupee-purchased forex be credited automatically?
No. Forex purchased in India against rupees requires prior RBI permission for credit.
5. Does purchase by a group treasury desk erase that condition?
No. Trace the actual funding and account holder rather than relying on an internal label.
6. What is the principal permitted use?
Bona fide trade transactions of the SEZ unit with resident or non-resident persons.
7. Are all payments to Indian suppliers prohibited?
No. Supported trade payments differ from lending or making funds available as accommodation.
8. Can a non-SEZ parent borrow the surplus?
The regulation prohibits lending or making these funds available to resident non-SEZ persons or entities.
9. Does common ownership remove the prohibition?
No group-ownership exception is created by the stated account rule.
10. Can the unit freely lend to another SEZ unit?
Do not assume so. Other-SEZ status is not a complete affirmative permission for the transaction.
11. Is a short treasury sweep harmless?
Duration alone does not establish permissibility. Review the actual access to funds and purpose.
12. Is the account exempt from all FEMA rules?
No. Read each specific relaxation with its preserved exceptions and account conditions.
13. Can LRS limits be applied as a company allowance?
No. An individual scheme is not a substitute for the unit’s applicable framework.
14. Does a positive bank balance prove available borrowing capacity?
No. Funds, commitments and authority for a proposed transaction are different questions.
15. Should unpaid commitments reduce the bank reconciliation?
Show them separately; do not record an unpaid invoice as an executed bank debit.
16. What should the monthly control emphasise?
Unit ownership of receipts, funding origin, trade support and prevention of unauthorised treasury uses.
Conclusion
Reconcile both the origin and intended use of currency. Keep genuine SEZ trade settlement distinct from permission-dependent credits and access to surplus funds by another entity.