RESERVE BANK OF INDIA
Foreign Exchange Department
Central Office
Mumbai - 400 001
July 11, 2012
A.P. (DIR Series) Circular No. 3
To,
All Authorised Dealer Category - I Banks
Madam / Sir,
Risk Management and Inter Bank Dealings
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] as amended from time to time and A.P. (DIR Series) Circular No.58 dated
December 15, 2011.
- Under the extant regulations, the facility of cancellation and rebooking is
not permitted for forward contracts, involving Rupee as one of the currencies,
booked by residents to hedge current and capital account transactions.
However, forward contract(s), booked by residents to hedge capital account
transactions for tenor greater than one year, if cancelled with one AD Category
I bank can be rebooked with another AD Category I bank, subject to the following
conditions:
- the switch is warranted by competitive rates on offer, termination of banking
relationship with the AD Category I bank with whom the contract was originally
booked;
- the cancellation and rebooking are done simultaneously on the maturity date
of the contract; and
- the responsibility of ensuring that the original contract has been
cancelled rests with the AD Category I bank who undertakes rebooking of the
contract.
- On a review, it has been decided to extend the above flexibility in regard to
rollover of contracts by switching AD Category banks on the maturity date of the
contract, to all hedge transactions undertaken by residents.
- 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/ 124