RBI/2013-14/118
A.P. (DIR Series) Circular No. 02
July 04, 2013
To,
All Authorised Dealer Category – I Banks
Madam / Sir,
Risk Management and Inter-Bank Dealings- Liberalization of documentation
requirements for the resident entities in the Indian Forex Market
Attention of Authorized Dealers Category – I (AD Category – I) banks is invited
to
A.P. (DIR Series) Circular No. 32 dated December 28, 2010 issued on
Comprehensive Guidelines on Over the Counter (OTC) Foreign Exchange Derivatives
and Overseas Hedging of Commodity Price and Freight Risks. In the annex to this
circular, under paragraph (II) sub-paragraph (b) (ii) it has been stated that in
the case of contracted exposure, AD Category I banks must obtain “Quarterly
certificates from the statutory auditors of the users, that the contracts
outstanding at any point of time with all AD Category I banks during the quarter
did not exceed the value of the underlying exposures”
- In view of the recommendations of the Technical Committee on Services /
Facilities for the Exporters (Chairman: Shri G. Padmanabhan, Executive Director,
Reserve Bank of India) regarding rationalization of the documentation process,
it has now been decided that AD banks, while offering hedging products under the
contracted exposure route to their customers may obtain an annual certificate
from the statutory auditors to the effect that the contracts outstanding with
all AD category I banks at any time during the year did not exceed the value of
the underlying exposures at that time. It is reiterated, however, that that the
AD bank, while entering into any derivative transaction with a client, shall
have to obtain an undertaking from the client to the effect that the contracted
exposure against which the derivative transaction is being booked has not been
used for any derivative transaction with any other AD bank.
- AD Category - I banks may bring the contents of this circular to the notice
of their constituents and customers concerned.
- 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,
(C D Srinivasan)
Chief General Manager