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Hedging facility to be simpler from Jan 1, says RBI

The products covered will be any Over the Counter (OTC) derivative or Exchange Traded Currency Derivative (ETCD)

Press Trust of India  |  Mumbai 

Simplified hedging facility from Jan 1: RBI

The today came out with simplified norms for hedging under which companies can take exposure of up to $30 million on gross basis.

The scheme of simplified was first announced by the of (RBI) in August 2016 and the draft scheme was released in April 2017.


"The facility is being introduced with a view to simplify the process for hedging by reducing documentation requirements, avoiding prescriptive stipulations regarding products, purpose and hedging flexibility, and to encourage a more dynamic and efficient hedging culture," said a notification.

The facility for resident and non-resident entities (other than individuals) to hedge on transactions, contracted or anticipated, permissible under (FEMA) will be effective from January 1, 2018.

The products covered will be any Over the Counter (OTC) derivative or Exchange Traded Currency Derivative (ETCD), the said adding cap on outstanding contracts is "$30 million, or its equivalent, on a gross basis".

"If hedging requirement of the user exceeds the limit in course of time, the designated may re-assess and, at its discretion, extend the limit up to 150 per cent of the stipulated cap," the guidelines said.

It further said banks should have an internal policy regarding the time limit up to which a hedge contract for a given underlying can be rolled-over or rebooked by the user.

First Published: Fri, November 10 2017. 08:44 IST
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