RBI/2014-15/401
A.P. (DIR Series) Circular No.58
January 14, 2015
To
All Category - I Authorised Dealer Banks
Madam / Sir,
Risk Management and Inter Bank Dealings: Hedging under Past Performance
Route- Liberalisation of Documentation Requirements in the OTC market
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. 32
dated December 28, 2010, as amended from time to time.
2. In order to further rationalise the documentation process for exporters
and importers relating to hedging of probable exposures based on past
performance, the extant guidelines in this regard have been revised as follows:
a) In terms of paragraph (2)(g)(ii) of section B contained in the annex to the
above circular, importers and exporters are required to furnish a quarterly
declaration, as per Appendix M, duly certified by the Statutory Auditor, to the
AD Category I banks regarding amounts booked with other AD Category I banks
under this facility. It has now been decided that importers and exporters shall,
henceforth, be required to furnish a quarterly declaration to the same effect as
per the format in Annex I to this circular signed by the Chief Financial Officer
(CFO) and the Company Secretary (CS). In the absence of a CS, the Chief
Executive Officer (CEO) or the Chief Operating Officer (COO) shall co-sign the
undertaking along with the CFO.
b) Further, in terms of paragraph (2)(g)(iv), aggregate outstanding contracts in
excess of 50 per cent of the eligible limit may be permitted by AD Category I
banks on being satisfied about the genuine requirements of their customers after
examination of the following documents:
- A certificate from the Statutory Auditor of the customer that all guidelines
have been adhered to while utilizing this facility; and
- A certificate of import/export turnover of the customer during the past three
years duly certified by their Statutory Auditor in the format given in Appendix
K.
It has now been decided that, henceforth, AD Category I banks may permit
aggregate outstanding contracts in excess of 50 per cent of the eligible limit
on being satisfied about the genuine requirements of their customers after
examination of a document as per the format in Annex II to this circular, signed
by the CFO and CS, containing the following:
- A declaration that all guidelines have been adhered to while utilizing this
facility; and
- A certificate of import/export turnover of the customer during the past three
years.
In the absence of a CS, the CEO or the COO shall co-sign the undertaking along
with the CFO.
c) As part of the annual audit exercise, the Statutory Auditor shall also
certify the following:
- The amounts booked with AD Category-I banks under this facility; and
- All guidelines have been adhered to while utilizing this facility over the past
financial year.
3. All other operational guidelines, terms and conditions shall remain
unchanged.
4. AD Category-I banks may bring the contents of this circular to the notice of
their constituents and customers.
5. 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
(Dimple Bhandia)
General Manager-in-Charge
Annex I
Format of Declaration of amounts booked/cancelled under Past Performance
facility
[On letterhead of the Company]
Date:
To,
(Name and address of the Bank)
Dear Sir,
Sub: Declaration of amounts booked/cancelled under Past Performance facility
We refer to the facility of booking of Forward or Option Contracts involving
Foreign Exchange, based on the past performance facility with Authorised Dealer
Category I Banks (AD Category I Banks), more specifically in relation to the
undertaking submitted by us to you, dated [ ] in this regard ("Undertaking").
In accordance with the said Undertaking, we hereby furnish a declaration
regarding the amounts of the transactions booked by us with all AD Category I
banks.
We are availing the past performance limit with the following AD Category I
banks:
………………………………….
Please find below the information regarding amounts booked / cancelled with all
AD Category I Banks under the said past performance facility as permitted under
the FEMA, 1999 Regulations :
(Amount in US Dollar) |
Eligible limit under past performance |
Aggregate amount of contracts booked with all the ADs from April till
date |
Amount of contracts cancelled with all ADs from April till date _______ |
Amount of contracts o/s with all ADs as on date |
Amount utilised (by delivery of documents) as on date |
Available limits under past performance as on date |
Thanking you,
Yours faithfully,
For XXXXXX
(Chief Financial Officer) (Company Secretary)
Annex II
Format for Declaration for utilisation of past performance limits in excess of
50 per cent and
details of import / export turnover, overdues, etc.
[On letterhead of the Company]
Date:
To,
(Name and address of the Bank)
Dear Sir,
Sub: Declaration for utilisation of past performance limits in excess of 50 per
cent and details of import / export turnover, overdues, etc.
- The value of the outstanding forward cover availed by us under the past
performance route as on [date] is [ ] per cent of our eligibility for our
imports [exports].
- We certify that all guidelines in respect of hedging of probable exposures under
the past performance route have been complied with while utilizing this
facility.
- We declare that the information in the table below is true to the best of our
knowledge and is provided in support of our application to hedge our currency
risk under the past performance route using permitted foreign exchange
derivative contracts in terms of Regulations and Guidelines issued under FEMA,
1999 (Act 42 of 1999).
(Amount in USD million) |
Financial Year (April-March) |
Turnover |
Percentage of overdue bills to turnover |
Existing limit for booking of forward cover based on past performance |
Import |
Export |
Import |
Export |
Export |
Import |
Year 1 |
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Year 2 |
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Year 3 |
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Yours faithfully,
For XXXXXX
(Chief Financial Officer) (Company Secretary)
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