RBI/2014-15/250
A.P. (DIR Series) Circular No. 34
Sep 30, 2014
To
All Category – I Authorised Dealer Banks
Madam / Sir,
Risk Management and Inter Bank Dealings : Hedging under Past Performance
Route
Attention of Authorised Dealers Category-I (AD Category-I) banks is
invited to the Foreign Exchange Management (Foreign Exchange Derivative
Contracts) Regulations, 2000 dated May 3, 2000 (Notification No. FEMA/25/RB-2000
dated May 3, 2000) as amended from time to time and
A.P. (DIR Series) circular
no. 58 dated December 15, 2011, as amended from time to time, and
A.P. (DIR
Series) circular no. 135 dated May 27, 2014.
- Under the extant guidelines relating to hedging of currency risk of
probable exposures based on past performance, resident importers are allowed to
book contracts up to 50 per cent of the eligible limit. The eligible limit is
computed as the average of the previous three financial years’ import turnover
or the previous year’s actual import turnover, whichever is higher.
- On a review of the evolving market conditions and with a view to bringing at
par both exporters and importers for hedging of currency risk of probable
exposures based on past performance, it has been decided to allow importers to
book forward contracts, under the past performance route, up to 100 per cent of
the eligible limit. Importers who have already booked contracts up to previous
limit of 50 per cent in the current financial year, shall be eligible for
difference arising out of the enhanced limits. All other operational guidelines,
terms and conditions shall apply mutatis mutandis.
- AD Category-I banks may bring the contents of this circular to the notice of
their constituents and customers.
- The directions contained in this circular have been issued under Sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions/ approvals, if any, required under any
other law.
Yours faithfully
(C D Srinivasan)
Chief General Manager