|
Forward Cover for Foreign Institutional Investors
A.P.
(DIR Series) Circular No. 50 dated 16th November 2002
Attention
of authorised dealers is invited to Regulation 5 of Notification No. FEMA. 25/
RB-2000 dated May 3, 2000. In terms of paragraph 1(b) of Schedule II to the
Notification, a registered Foreign Institutional Investor (FII) has been
permitted to enter into a forward contract with rupee as one of the currencies
with an authorised dealer in India, provided that the value of the hedge does
not exceed 15 per cent of the market value of the equity as at the close of
business on 31st March 1999, converted at the rate of US $ 1= Rs. 42.43 plus the
increase in the market value/ inflows thereafter.
2.
With a view to further liberalise and simplify the facility, it has been
decided to permit the FIIs to hedge the market value of their entire investment
in equity as on a particular date without any reference to a cut-off date. If a
hedge becomes naked in part or full owing to shrinking of the portfolio, it may
be allowed to continue to the original maturity, if so desired.
3.
All other instructions contained in Schedule II of the notification
remain unchanged.
4.
Necessary amendments to the Foreign Exchange Management (Foreign
Exchange Derivatives Contracts) Regulations 2000 are being notified
separately.
5.
Authorised Dealers may bring the contents of this circular to the notice
of their constituents concerned.
6.
The directions contained in this circular have been issued under Section
10 (4) and Section 11 (1) of the Foreign Exchange Management Act, 1999 (42 of
1999).
|