Risk Management & Inter-Bank Dealings: Booking of Forward Contracts – Liberalisation

CLR Note: The Reserve Bank of India has issued a circular no. RBI/2015-16/201 dated 8th October, 2015 which clarifies Risk Management & Inter-Bank Dealings: Booking of Forward Contracts – Liberalisation

RBI/2015-16/201

A. P. (DIR Series) Circular No. 20

October 8, 2015

To,

All Authorised Dealer Category – I banks

Madam / Sir,

Risk Management & Inter-Bank Dealings: Booking of Forward Contracts – Liberalisation

Attention of Authorised Dealers Category-I (AD Cat-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) Circulars No. 15 dated October 29, 2007 and 119 dated April 7, 2014 regarding Booking of Forward Contracts Liberalisation, in terms of which resident individuals, firms and companies, to manage / hedge their foreign exchange exposures arising out of actual or anticipated remittances, both inward and outward, are allowed to book forward contracts, without production of underlying documents, up to a limit of USD 250,000 based on self-declaration.

2. As announced in the Fourth Bi-monthly Monetary Policy Statement (para. no. 39) on September 29, 2015, with a view to further liberalising the existing hedging facilities, it has been decided to allow all resident individuals, firms and companies, who have actual or anticipated foreign exchange exposures, to book foreign exchange forward and FCY-INR options contracts up to USD 1,000,000 (USD one million) without any requirement of documentation on the basis of a simple declaration. While the contracts booked under this facility would normally be on a deliverable basis, cancellation and rebooking of contracts are permitted. Based on the track record of the entity, the concerned AD Cat-I bank may, however, call for underlying documents, if considered necessary, at the time of rebooking of cancelled contracts. All other conditions as indicated in A.P. (DIR Series) circular no. 15 dated October 29, 2007 including suitability & appropriateness (S&A) norms shall apply, mutatis mutandis. The amended application and reporting formats are provided in Annexes I and II, respectively, of this circular.

3. The existing facilities in terms of A.P. (DIR Series) Circular No. 15 dated October 29, 2007 for Small and Medium Enterprises (SMEs) shall remain unchanged.

4. AD Category I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The directions contained in this circular have been issued under Section 10(4) and Section 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,

(R Subramanian)
Chief General Manager

Application cum Declaration for booking of forward contracts_options up to USD 1,000,000 by Resident Individuals, Firms and Companies