NRIs can now access exchanges for hedging

Currently, NRIs are permitted to hedge their currency risk through over-the-counter transactions

The Reserve Bank of India (RBI) on Thursday allowed non-resident Indians (NRIs) access to the exchange traded currency derivatives (ETCD) market, which would allow them to directly hedge their exposures through the exchanges, in addition of going to banks to do it on their behalf.
 
Currently, NRIs are permitted to hedge their rupee currency risk through over-the-counter transactions with banks.
 
However, NRIs have to designate a local bank for monitoring and reporting the positions of the user in the exchange as well as in the OTC segment.
 

“NRIs may take positions in the currency futures / exchange traded options market to hedge the currency risk on the market value of their permissible … rupee investments in debt and equity and dividend due and balances held in NRE accounts,” the notification said.

 
“The onus of ensuring the existence of the underlying exposure shall rest with the NRI concerned,” RBI said, adding if the magnitude of exposure exceeds the magnitude of underlying exposure, the concerned NRI shall be liable to such penal action.