RBI/2013-2014/446
A.P. (DIR Series) Circular No. 92
January 13, 2014
All Category - I Authorised Dealer banks
Madam/Sir,
Risk Management and Inter Bank Dealings
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,
A.P. (DIR Series) Circular no. 13 dated July 31, 2012
and
A.P. (DIR Series) Circular no 36 dated September 4, 2013.
- 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,
exporters are allowed to cancel and rebook forward contracts to the extent of 50
per cent of the contracts booked in a financial year for hedging their
contracted export exposures and importers are allowed to cancel and rebook
forward contracts to the extent of 25 percent of the contracts booked in a
financial year for hedging their contracted import exposures.
- On a review of the evolving market conditions and with a view to providing
operational flexibility in respect of current and capital account transactions,
it has been decided to allow, in case of contracted exposures, forward contracts
in respect of all current account transactions as well as capital account
transactions with a residual maturity of one year or less to be freely cancelled
and rebooked. As far as the exposure of the FIIs/QFIs/other portfolio investors
is concerned, forward contracts booked by these investors, once cancelled, can
be rebooked up to the extent of 10 per cent of the value of the contracts
cancelled. The forward contracts booked by these investors may, however, be
rolled over on or before maturity.
- 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,
(CD Srinivasan)
Chief General Manager