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India central bank says rupee transactions will not be allowed in international centres

[MUMBAI] Banks which want to set up units within the special financial zones being created in India will only be allowed to transact in non-rupee currencies and will be exempt from reserve requirements, the Reserve Bank of India said on Wednesday.

The banking units within the so-called International Financial Services Centres (IFSCs) will also have to follow the same rules applicable to Indian banks regarding bad loans, provisioning, income recognition and asset classification, the RBI said.

The Indian government is setting up the first IFSC in Prime Minister Narendra Modi's home state, Gujarat, which will be known as Gujarat International Finance Tec-City (GIFT).

Each bank will be allowed to set up only one unit in each IFSC.