Reserve Bank Of India
A.P. (DIR Series) Circular No. 30
September 12, 2012
To,
All Category - I Authorised Dealer Banks
Madam / Sir,
Comprehensive Guidelines on Over the Counter
(OTC) Foreign Exchange Derivatives – Cost Reduction Structures
Attention of Authorized 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] and
A.P. (DIR Series) Circular No.32 dated December 28, 2010, as
amended from time to time.
- Under the extant instructions, use of cost reduction structures, i.e., cross
currency option cost reduction structures and foreign currency –INR option cost
reduction structures have been permitted to hedge exchange rate risk arising out
of trade transactions and the External Commercial Borrowings (ECBs).
- On a review, it has been decided to permit the use of cost reduction
structures for hedging the exchange rate risk arising out of foreign currency
loans availed of domesticallyagainst FCNR(B) deposits.
- Necessary amendments to the Notification No. FEMA.25/RB-2000 dated May 3,
2000 [Foreign Exchange Management (Foreign Exchange Derivative Contracts)
Regulations, 2000] are being notified separately.
- 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,
(Rudra Narayan Kar)
Chief General Manager
RBI/2012-13/204