RBI/2014-15/216
A.P. (DIR Series) Circular No.28
September 8, 2014
To
All Category - I Authorised Dealer Banks
Madam / Sir,
Risk Management and Inter Bank Dealings: Hedging Facilities for Foreign
Portfolio Investors (FPIs)
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.
- Under the extant regulations, Foreign Portfolio Investors (FPIs) are
allowed 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 certain conditions as specified in
A.P. (DIR
Series) Circular No. 32 dated December 28, 2010 as amended from time to
time.
- In order to enhance the hedging facilities for the FPIs holding
securities under the Portfolio Investment Scheme (PIS) in terms of schedules
2, 2A, 5, and 8 of the Foreign Exchange Management (Transfer or issue of
security by a person resident outside India) Regulations, 2000 (Notification
No. FEMA 20 /2000-RB dated 3rd May 2000) as amended from time to time, as
announced in the Monetary Policy Statement of April 1, 2014, it has been
decided to permit FPIs to hedge the coupon receipts arising out of their
investments in debt securities in India falling due during the following
twelve months subject to the condition that the hedge contracts shall not be
eligible for rebooking on cancellation. The contracts can however be rolled
over on maturity provided the relative coupon amount is yet to be received.
- All other regulations and guidelines issued under FEMA, 1999 relating to
investment in debt securities and hedging facilities for non resident
investors including FPIs shall remain unchanged.
- 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,
(C. D. Srinivasan)
Chief General Manager