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Presently resident entities having overseas direct investments (in equity and loan) are permitted to hedge the exchange risk arising out of such investments by entering into forward / option contracts with AD Category – I banks, subject to verification of such exposure. Such contracts must be completed by delivery or rolled over on the due date and not cancelled.
Hedging of Overseas Direct Investments By Residents - Liberalisation
2. With a view to provide greater flexibility to residents with overseas direct investments (in equity and loan), Reserve Bank of India has decided on 19th June 2007 to allow cancellation of such forward contracts. Accordingly, AD Category – I banks may allow cancellation of forward contracts entered into by residents for overseas direct investments (in equity and loan) for hedging the exchange risk. Further, 50 per cent of the cancelled contracts may be allowed to be rebooked.
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