RBI permits non-resident entities to hedge their currency risk in respect of exports from and imports to India, invoiced in Indian Rupees.
July 21, 2011:
In order to facilitate greater use of Indian Rupee in trade transactions, as announced in the Monetary Policy Statement for the year 2011-12, it has been decided to allow non-resident importers and exporters to hedge their currency risk in respect of exports from and imports to India, invoiced in Indian Rupees.
They can enter into Forward foreign exchange contracts with rupee as one of the currencies and foreign currency-INR options with AD Category I banks in India. The contracts, once cancelled, cannot be rebooked. The contracts may, however, be rolled over on or before maturity subject to maturity of the underlying exposure.
On cancellation of the contracts, gains may be passed on to the customer subject to the customer providing a declaration that he is not going to rebook the contract or that the contract has been cancelled on account of cancellation of the underlying exposure.
In case the underlying trade transaction is extended, rollover can be permitted once based on the extension of the underlying trade transaction for which suitable documentation is to be provided by the overseas bank and the same procedure followed as in case of the original contract.
The following undertakings also need to be taken from the customer
That the same underlying exposure has not been hedged with any other AD Category I bank/s in India.
If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately.
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