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Reserve Bank of India (RBI) today said foreign institutional Investors (FII) will need mandate from those holding participatory notes and Overseas Derivative Instruments to hedge currency risks.
If an FII wishes to enter into a hedge contract for the exposure relating to that part of the securities held by it against which it has issued any PN/ODI, it must have a mandate from the PN/ODI holder for the purpose, and RBI said a notification.
RBI had received queries about the applicability of the clarifications issued on June 16 to PN\ODI holders. It pertained to FIIs hedging the Rupee exposure of one of its sub-account holders.
This hedging should be done on the basis of a mandate from the sub-account holder for the purpose.
