Reserve Bank Of India
A.P. (DIR Series) Circular No.45
October 22, 2012
To,
All Authorised Dealer Category – I Banks
Madam / Sir,
Facilities for Persons Resident outside India – FIIs
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] and
A.P.
(DIR Series) Circular No.32 dated December 28, 2010, as amended from time to
time.
- As per the extant guidelines, only designated branches of AD Category I banks
maintaining accounts of FIIs are allowed to act as market makers to FIIs for
hedging their currency risk on the market value of entire investment in equity
and/or debt in India as on a particular date.
- It has now been decided to allow FIIs to approach any AD Category I bank for
hedging their currency risk on the market value of entire investment in equity
and/or debt in India as on a particular date subject to the following
conditions:
- The eligibility for cover may be determined on the basis of a valuation
certificate provided by the designated AD category bank along with a declaration
by the FII to the effect that its global outstanding hedges plus the derivatives
contracts cancelled across all AD category banks is within the market value of
its investments.
- The FII should also provide a quarterly declaration to the custodian bank that
the total amount of derivatives contract booked across AD Category banks are
within the market value of its investments.
- The hedges taken with AD banks other than designated AD banks, have to be
settled through the Special Non-Resident Rupee A/c maintained with the
designated bank through RTGS/NEFT.
- AD Category – I bank 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/2012-13/258