Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

Master Circular on Risk Management and Inter-Bank Dealings

FEMA - 05/2015-16 - Dated:- 1-7-2015 - RBI/2015-16/84 Master Circular No. 5/2015-16 July 1, 2015 To, All Authorised Dealers - Category I Banks Madam / Sir, Foreign Exchange Derivative Contracts, Overseas Commodity & Freight Hedging, Rupee Accounts of Non-Resident Banks, Inter-Bank Foreign Exchange Dealings, etc. are governed by the provisions in Notification No. FEMA 1/2000-RB, Regulation 4(2) of Notification No. FEMA 3/RB-2000 and Notification No. FEMA 25/RB-2000 dated May 3, 2000 and subse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

T -A RISK MANAGEMENT SECTION I Facilities for Persons Resident in India other than Authorised Dealers Category-I..3 SECTION II Facilities for Persons Resident outside India SECTION III Facilities for Authorised Dealers Category-I PART-B ACCOUNTS OF NON-RESIDENT BANKS PART-C INTER-BANK FOREIGN EXCHANGE DEALINGS PART-D REPORTS TO THE RESERVE BANK Annex I Annex II Annex III Annex IV Annex V Annex VI Annex VII Annex VIII Annex IX Annex X Annex XI Annex XII Annex XIII Annex XIV Annex XV Annex XVI Ann .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nts (other than AD Category I banks) are detailed under Paragraph B. A. Products and Operational Guidelines The product/purpose-wise facilities for persons resident in India (other than AD Category I banks) are detailed under the following subheads: 1) Contracted Exposure 2) Probable Exposure 3) Special Dispensation 1) Contracted Exposures AD Category I banks have to evidence the underlying documents so that the existence of underlying foreign currency exposure can be clearly established. AD Cat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r, may be obtained. In either of the cases, before offering the contract, the AD Category I banks should obtain an undertaking from the customer and also certificates from the statutory auditor (for details refer para B (b) for General Instructions). While details of the underlying have to website: be recorded at the time of booking the contract, in the view of logistic issues, a maximum period of 15 days may be allowed for production of the documents. If the documents are not submitted by the c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Contracts Participants Market-makers - AD Category I banks Users - Persons resident in India Purpose a) To hedge exchange rate risk in respect of transactions for which sale and /or purchase of foreign exchange is permitted under the FEMA 1999, or in terms of the rules/ regulations/directions/orders made or issued there under. b) To hedge exchange rate risk in respect of the market value of overseas direct investments (in equity and loan). i) Contracts covering overseas direct investment (ODI) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) exposure of importers in respect of customs duty payable on imports. i) Forward foreign exchange contracts covering such transactions will be settled in cash on maturity. ii) These contracts once cancelled, are not eligible to be rebooked. iii) In the event of any change in the rate(s) of customs duties, due to Government notifications subsequent to the date of the forward contracts, importers may be allowed to cancel and/or rebook the contracts before maturity. Operational Guidelines, Terms a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

amount of the underlying transaction is not ascertainable, the contract may be booked on the basis of reasonable estimates. However, there should be periodical review of the estimates. c) Foreign currency loans/bonds will be eligible for hedge only after final approval is accorded by the Reserve Bank, where such approval is necessary or Loan Registration Number is allotted by the Reserve Bank. d) Global Depository Receipts (GDRs)/American Depository Receipts (ADRs) will be eligible for hedge onl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

one year or less may be freely cancelled and rebooked. g) In case of forward contracts involving Rupee as one of the currencies, booked by residents in respect of all hedge transactions, if cancelled with one AD Category I bank can be rebooked with another AD Category I bank subject to the following conditions: (i) the switch is warranted by competitive rates on offer, termination of banking relationship with the AD Category I bank with whom the contract was originally booked; (ii) the cancellat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hedging trade transactions may be permitted by an AD Category I bank on being satisfied with the circumstances under which such substitution has become necessary. The AD Category I bank may also verify the amount and tenor of the underlying substituted. ii) Cross Currency Options (not involving Rupee) Participants Market-makers - AD Category I banks as approved for this purpose by the Reserve Bank Users - Persons resident in India Purpose a) To hedge exchange rate risk arising out of trade trans .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ts also. e) Cross currency options should be written by AD Category I banks on a fully covered back-to-back basis. The cover transaction may be undertaken with a bank outside India, an Off-shore Banking Unit situated in a Special Economic Zone or an internationally recognized option exchange or another AD Category I bank in India. AD Category I banks desirous of writing options, should obtain a one-time approval from the Chief General Manager, Reserve Bank of India, Financial Markets Regulation .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of a tender bid in foreign exchange. Operational Guidelines, Terms and Conditions a) AD Category I banks having a minimum CRAR of 9 per cent, can offer foreign currency- INR options on a back-to-back basis. b) For the present, AD category I banks can offer only plain vanilla European options. c) Customers can buy call or put options. d) All guidelines applicable for foreign currency-INR foreign exchange forward contracts are applicable to foreign currency-INR option contracts also. e) AD Catego .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

um in this regard, specific approval of the Board for the type of option writing and permissible limits. The memorandum put up to the Board should clearly mention the downside risks, among other matters. Minimum Eligibility Criteria: i. Net worth not less than ₹ 300 crore ii. CRAR of 10 per cent iii. Net NPAs not exceeding 3 per cent of the net advances iv. Continuous profitability for at least three years The Reserve Bank will consider the application and accord a one-time approval at its .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sed on market value of an identical off-setting option. h) Market makers are allowed to hedge the Delta of their option portfolio by accessing the spot and forward markets. Other Greeks may be hedged by entering into option transactions in the inter-bank market. i) The Delta of the option contract would form part of the overnight open position. j) The Delta equivalent as at the end of each maturity shall be taken into account for the purpose of AGL. The residual maturity (life) of each outstandi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r marking to market their portfolio. m) The accounting framework for option contracts will be as per FEDAI circular No.SPL-24/FC-Rupee Options/2003 dated May 29, 2003. iv) Foreign Currency-INR Swaps Participants Market-makers - AD Category I banks in India. Users - i. Residents having a foreign currency liability and undertaking a foreign currency-INR swap to move from a foreign currency liability to a Rupee liability. ii. Incorporated resident entities having a rupee liability and undertaking a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Category I bank is required to examine the suitability and appropriateness of the swap and be satisfied about the financial soundness of the corporate. Purpose To hedge exchange rate and/or interest rate risk exposure for those having long-term foreign currency borrowing or to transform long-term INR borrowing into foreign currency liability. Operational Guidelines, Terms and Conditions a) No swap transactions involving upfront payment of Rupees or its equivalent in any form shall be undertaken. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

had been cancelled. This flexibility is not permitted for INR-FCY swaps. d) AD Category I banks should not offer leveraged swap structures. Typically, in leveraged swap structures, a multiplicative factor other than unity is attached to the benchmark rate(s), which alters the payables or receivables vis-à-vis the situation in the absence of such a factor. e) The notional principal amount of the swap should not exceed the outstanding amount of the underlying loan. f) The maturity of the sw .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on each reporting date; b. The companies follow the Accounting Standards notified under section 211 of the Companies Act, 1956 and other applicable Guidance of the Institute of Chartered Accountants of India (ICAI) for such products/ contracts as also the principle of prudence which requires recognition of expected losses and non-recognition of unrealized gains; c. Disclosures are made in the financial statements as prescribed in ICAI press release dated 2nd December 2005; and d. The companies .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ns by the users, on a standalone basis, is not permitted. b) Users can enter into option strategies of simultaneous buy and sell of plain vanilla European options, provided there is no net receipt of premium. c) Leveraged structures, digital options, barrier options, range accruals and any other exotic products are not permitted. d) The portion of the structure with the largest notional, computed over the tenor of the structure, should be reckoned for the purpose of underlying. e) The delta of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

shall not exceed two years. h) The MTM position should be intimated to the users on a periodical basis. vi) Hedging of Borrowings in foreign exchange, which are in accordance with the provisions of Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000. Products - Interest rate swap, Cross currency swap, Coupon swap, Cross currency option, Interest rate cap or collar (purchases), Forward rate agreement (FRA) Participants Market-makers - a) AD Category I banks .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oducts, as detailed above should not involve the rupee under any circumstances. b) Final approval has been accorded or Loan Registration Number allotted by the Reserve Bank for borrowing in foreign currency. c) The notional principal amount of the product should not exceed the outstanding amount of the foreign currency loan. d) The maturity of the product should not exceed the unexpired maturity of the underlying loan. e) The contracts may be cancelled and rebooked freely. 2) Probable exposures .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

trades in merchandise goods as well as services. Products Forward foreign exchange contracts, cross currency options (not involving the rupee), foreign currency-INR options and cost reduction structures [as mentioned in section B para I 1(v)]. Operational Guidelines, Terms and Conditions a) Corporates having a minimum net worth of ₹ 200 crores and an annual export and import turnover exceeding ₹ 1000 crores and satisfying all other conditions as stipulated in section B para I 1(v) ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ous year s actual import turnover, whichever is higher for imports. Importers, who have already booked contracts up to previous limit of fifty percent in the current financial year, shall be eligible for difference arising out of the enhanced limit. c) Contracts booked up to 75 percent of the eligible limit mentioned at paragraph (b) (i) and (b) (ii) above may be cancelled with the exporter/importer bearing/being entitled to the loss or gain as the case may be. Contracts booked in excess of 75 p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ank of India. The additional limits, if sanctioned, shall be on a deliverable basis. f) Any contract booked without producing documentary evidence will be marked off against this limit. These contracts once cancelled, are not eligible to be rebooked. Rollovers are also not permitted. g) AD banks should permit their clients to use the past performance facility only after satisfying themselves that the following conditions are complied with: i. An undertaking may be taken from the customer that su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

CFO. iii. For an exporter customer to be eligible for this facility, the aggregate of overdue bills shall not exceed 10 per cent of the turnover. iv. Aggregate outstanding contracts in excess of 50 per cent of the eligible limit may be permitted by the AD Category I bank on being satisfied about the genuine requirements of their customers after examination of a document as per the format in Annex VII, signed by the CFO and CS, containing the following: A declaration that all guidelines have bee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

previous year) may require some time at the commencement of the financial year. However, if the statements are not submitted within three months from the last date of the financial year, the facility should not be provided until submission of the audited figures. j) As part of the annual audit exercise, the Statutory Auditor shall certify the following: The amounts booked with AD Category-I banks under this facility; and All guidelines have been adhered to while utilizing this facility over the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nsation i) Small and Medium Enterprises (SMEs) Participants Market-makers - AD Category I. Users - Small and Medium Enterprises (SMEs) 3 Purpose To hedge direct and / or indirect exposures of SMEs to foreign exchange risk Product Forward foreign exchange contracts Operational Guidelines: Small and Medium Enterprises (SMEs) having direct and / or indirect exposures to foreign exchange risk are permitted to book / cancel / / roll over forward contracts without production of underlying documents to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ntracts to the SME customers as per Para 8.3 of 'Comprehensive Guidelines on Derivatives' issued vide DBOD.No.BP.BC. 44 /21.04.157/2011-12 dated November 2, 2011. c) The SMEs availing this facility should furnish a declaration to the AD Category I bank regarding the amounts of forward contracts already booked, if any, with other AD Category I banks under this facility. ii) Resident Individuals, Firms and Companies Participants Market-makers - AD Category I banks Users: Resident Individua .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

flows or other exigencies, the contracts booked under this facility may be allowed to be cancelled and re-booked. The notional value of the outstanding contracts should not exceed USD 250,000 at any time. b) The contracts may be permitted to be booked up to tenors of one year only. c) Such contracts may be booked through AD Category I banks with whom the resident individual has banking relationship, on the basis of an application-cum-declaration in the format given in Annex XIV. The AD Category .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ons that are applicable across the OTC foreign exchange derivatives, are detailed below. In addition to the guidelines under the specific foreign exchange derivative product, the general instructions should be followed scrupulously by the users (residents in India other than AD Category I banks) and the market makers (AD Category I banks). a) In case of all forex derivative transactions [except INR- foreign currency swaps i.e. moving from INR liability to foreign currency liability as in section .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

i) An undertaking from the customer that the same underlying exposure has not been covered with any other AD Category I bank/s. Where hedging of the same exposure is undertaken in parts, with more than one AD Category I bank, the details of amounts already booked with other AD Category I bank/s should be clearly indicated in the declaration. This undertaking can also be obtained as a part of the deal confirmation. ii) An annual certificate from the statutory auditors to the effect that the cont .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

change exposures are not permitted to be hedged. However, in case of INR- foreign currency swaps, at the inception, the user can enter into one time plain vanilla cross currency option (not involving Rupee) to cap the currency risk. d) In any derivative contract, the notional amount should not exceed the actual underlying exposure at any point in time. Similarly, the tenor of the derivative contracts should not exceed the tenor of the underlying exposure. The notional amount for the entire trans .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s help the client in hedging; ii) the spot rate prevailing at the time of executing the transaction; and iii) quantified maximum loss/ worst downside in various scenarios. g) AD Category I banks can offer only those products that they can price independently. This is also applicable to the products offered even on back to back basis. The pricing of all forex derivative products should be locally demonstrable at all times. h) The market-makers should carry out proper due diligence regarding user .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. 86/21.04.157/2006-07 dated April 20, 2007 and as amended from time to time are also applicable to forex derivatives. k) Sharing of information on derivatives between banks is mandatory and as detailed vide circular DBOD.No.BP.BC.46/08.12.001/2008-09 dated September 19, 2008 and DBOD.No. BP. BC. 94/ 08.12.001/ 2008-09 dated December 8, 2008. 4. Currency Futures on recognised Stock /New Exchanges As part of further developing the derivatives market in India and adding to the existing menu of for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

et in India subject to directions contained in the Currency Futures (Reserve Bank) website: Directions, 2008 [Notification No.FED.1/DG(SG)-2008 dated August 6, 2008] (Directions) and Notification No.FED. 2 / ED (HRK)-2009 dated January 19, 2010 issued by the Reserve Bank of India, which have been issued under Section 45W of the Reserve Bank of India Act, 1934. Currency futures are subject to following conditions: Permission (i) Currency futures are permitted in US Dollar (USD) - Indian Rupee (IN .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

SD-INR, EUR-INR, GBP-INR and JPY-INR contracts are allowed to be traded. b. The size of each contract shall be USD 1000 for USD-INR contracts, Euro 1000 for Euro-INR contracts, GBP 1000 for GBP-INR contracts and JPY 100,000 for JPY-INR contracts. c. The contracts shall be quoted and settled in Indian Rupees. d. The maturity of the contracts shall not exceed 12 months. e. The settlement price for USD-INR and Euro-INR contracts shall be the Reserve Bank s Reference Rates and for GBP-INR and JPY-IN .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n Exchange Management Act, 1999 as AD Category - I bank are permitted to become trading and clearing members of the currency futures market of the recognized stock exchanges, on their own account and on behalf of their clients, subject to fulfilling the minimum prudential requirements. (iii) AD Category - I banks which do not meet the above minimum prudential requirements and AD Category - I banks which are Urban Co-operative banks or State Co-operative banks can participate in the currency futu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ining initial, extreme loss and calendar spread margins and the Clearing Corporations / Clearing Houses of the exchanges should ensure maintenance of such margins by the participants on the basis of the guidelines issued by the SEBI from time to time. Surveillance and disclosures The surveillance and disclosures of transactions in the currency futures market shall be carried out in accordance with the guidelines issued by the SEBI. Authorisation to Currency Futures Exchanges / Clearing Corporati .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ons contracts have been permitted to be traded in recognized stock exchanges or new exchanges, recognized by the Securities and Exchange Board of India (SEBI) in the country. Exchange traded Currency options are subject to following conditions: Permission (i) Exchange traded Currency option contracts are permitted in US Dollar (USD) - Indian Rupee (INR). (ii) Persons resident in India may purchase or sell exchange traded currency options contracts subject to the terms and conditions laid down in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ut options. iii. The size of each contract shall be USD 1000. iv. The premium shall be quoted in Rupee terms. The outstanding position shall be in USD. v. The maturity of the contracts shall not exceed twelve months. vi. The contracts shall be settled in cash in Indian Rupees. vii. The settlement price shall be the Reserve Bank s Reference Rate on the date of expiry of the contracts. Membership i) Members registered with the SEBI for trading in currency futures market shall be eligible to trade .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

count and on behalf of their clients, subject to fulfilling the following minimum prudential requirements: a) Minimum net worth of ₹ 500 crores. b) Minimum CRAR of 10 per cent. c) Net NPA should not exceed 3 per cent. d) Made net profit for last 3 years. The AD Category - I banks, which fulfil the prudential requirements, should lay down detailed guidelines with the approval of their Boards for trading and clearing of the exchange traded currency options contracts and management of risks. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

SEBI. ii) The AD Category - I banks shall operate within prudential limits, such as Net Open Position (NOP) and Aggregate Gap (AG) limits. Risk Management measures The trading of exchange traded currency options shall be subject to maintaining initial, extreme loss and calendar spread margins and the Clearing Corporations / Clearing Houses of the exchanges should ensure maintenance of such margins by the participants on the basis of the guidelines issued by the SEBI from time to time. Surveilla .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

risation issued by the Reserve Bank under section 10 (1) of the Foreign Exchange Management Act, 1999. 6. Terms and conditions for residents participating in the Exchange Traded Currency Derivatives(ETCD) a. Domestic participants shall be allowed to take a long (bought) as well as short (sold) position in USD-INR pair upto USD 15 million per exchange without having to establish the existence of any underlying exposure. In addition, domestic participants shall be allowed to take long as well as s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, Reserve Bank of India. b. Domestic participants who want to take a position in excess of limits mentioned at paragraph (a) above in the ETCD market will have to establish the existence of an underlying exposure. The procedure for the same shall be as under: i. For participants who are exporters or importers of goods and services, the eligible limit up to which they can take appropriate hedging positions in ETCDs will be determined as higher of the (I) average of the last three years export or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase may be. iii. Based on the above certificate, a trading member can book ETCD contracts upto fifty per cent of the eligible limit [as at paragraph (i) above] on behalf of the concerned customer. If a participant wishes to take position beyond the fifty per cent of the eligible limit in the ETCD, it has to produce a signed undertaking from the Chief Financial Officer (CFO) or the senior most functionary responsible for company's finance and accounts and the Company Secretary (CS) to the eff .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t mentioned in paragraph (i) above. iv. For all other participants having an underlying foreign currency exposure in respect of both current and capital account transactions as also exporters and importers who wish to access the ETCD market on the basis of contracted exposure, they will have to undertake the transaction through AD Category-I bank/s who are operating as trading members. In such cases, the responsibility for verification of the underlying exposures and ensuring that the ETCD bough .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and accounts and the Company Secretary (CS) to the effect that the sum total of the outstanding OTC derivative contracts and outstanding ETCD contracts has been in correspondence with the eligible limits. In the absence of a CS, the Chief Executive Officer (CEO) or the Chief Operating Officer (COO) shall co-sign the undertaking along with the CFO or the senior most functionary responsible for company's finance and accounts. c. It may be noted that the onus of complying with the provisions of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tional commodity exchanges/ markets. This facility must not be used in conjunction with any other derivative product. It may be noted that the role of Authorized Dealer banks here is primarily to provide facilities for remitting foreign currency amounts towards margin requirements from time to time, subject to verification of the underlying exposure. In lieu of making a direct remittance towards payment obligations arising out of commodity derivative transactions entered into by customers with o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s Participants Users: Companies in India engaged in import and export of commodities Facilitators: AD Category I banks. Purpose: To hedge price risk of the imported/exported commodity Products: Standard exchange traded futures and options (purchases only) in international commodity exchanges. If risk profile warrants -may use OTC contracts overseas. Operational Guidelines AD Category I banks satisfying certain minimum norms, and authorized by the Reserve Bank may grant permission to companies li .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ge traded futures and options (purchases only) in international commodity exchanges. If risk profile warrants - may use OTC contracts overseas. Operational Guidelines: a) Hedging to be permitted up to 50 per cent of the volume of actual imports during the previous year or 50 per cent of the average volume of imports during the previous three financial years, whichever is higher. b) Contracts booked under this facility will have to be regularized by production of supporting import orders during t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

underlying economic exposures Products: Standard exchange traded futures and options (purchases only) in international commodity exchanges. Operational Guidelines: a) Hedging may be permitted up to the average of previous three financial years (April to March) actual purchases / sales or the previous year s actual purchases / sales turnover, whichever is higher, of the above commodities. b) AD Category I banks would require the user to submit a Board resolution certifying Board approved policie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

commodity exchanges. If risk profile warrants - may use OTC contracts overseas. Operational Guidelines: a) AD Category I banks should ensure that permission for hedging ATF is granted only against firm orders. b) AD Category I banks should retain necessary documentary evidence. c) AD Category I banks would require the user to submit a Board resolution certifying Board approved policies which define the overall framework within which derivatives activities should be conducted and the risks contr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onal commodity exchanges. If risk profile warrants - may use OTC contracts overseas. Operational Guidelines: a) The hedging will be allowed strictly on the basis of underlying contracts. b) AD Category I banks should retain necessary documentary evidence. c) All other conditions and guidelines as per Annex XI (A & B) should be complied with. d. Hedging of price risk on Inventory Participants Users: Domestic oil marketing and refining companies. Facilitators: AD Category I banks Purpose: To h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ystemic international price risk in commodities. Facilitators: AD Category I banks Purpose: To hedge systemic international price risk in commodities. Products: Standard exchange traded futures and options (purchases only) in international commodity exchanges. If risk profile warrants - may use OTC contracts overseas. Operational Guidelines: Applications of companies/ firms which are not covered by the delegated authority of AD Category I may be forwarded to the Reserve Bank for consideration th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

isk profile warrants - may use OTC contracts overseas. Operational Guidelines: AD banks may allow entities in the Special Economic Zones (SEZ) to undertake hedging transactions in the overseas commodity exchanges/markets to hedge their commodity prices on export/import, subject to the condition that such contract is entered into on a stand-alone basis. (The term ''standalone'' means the unit in SEZ is completely isolated from financial contacts with its parent or subsidiary in th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

k through their AD Category I bank. It may be noted that the role of Authorized Dealer banks here is primarily to provide facilities for remitting foreign currency amounts towards margin requirements from time to time, subject to verification of the underlying exposure. This facility must not be used in conjunction with any other derivative product. The facility is divided into following categories: I) Delegated Route Participant: Users: Domestic oil-refining companies and shipping companies. Fa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e one year forward. i) The exchanges on which the products are purchased must be a regulated entity in the host country. ii) AD Category I banks should ensure that the entities hedging their freight exposures have Board Resolutions which certify that the Board approved Risk Management policies, defines the overall framework within which derivative transactions should be undertaken and the risks contained therein. AD Category I banks should approve this facility only after ensuring that the sanct .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rporate has a Risk Management Policy, incorporating the above details at the time of permitting the transaction itself and as and when changes made therein. iv) The underlying exposure for the users is detailed under (a) and (b) below: (a) For Domestic oil refining companies: (i) The freight hedging will be on the basis of underlying contracts i.e., import/export orders for crude oil/petroleum products. (ii) Additionally, domestic oil refining companies may hedge their freight risk on anticipate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g companies: (i) The hedging will be on the basis of owned / controlled ships of the shipping company which have no committed employment. The quantum of hedge will be determined by the number and capacity of these ships. The same may be certified by the statutory auditor and submitted to the AD Category I bank. (ii) Contracts booked will have to be regularized by production of underlying documents i.e. employment of the ship during the currency of the hedge. An undertaking may be obtained from t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the international market / exchange. Operational Guidelines a) The maximum tenor permissible will be one year forward. b) The exchanges on which the products are purchased must be a regulated entity in the host country. c) Applications of companies/ firms which are not covered by the delegated authority of AD Category I may be forwarded to the Reserve Bank for consideration through the International Banking Division of their AD Category I bank concerned along with the latter s specific recom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cy risk on the market value of entire investment in equity and/or debt in India as on a particular date. ii) To hedge the coupon receipts arising out of investments in debt securities falling due during the following twelve months. iii) To hedge Initial Public Offers (IPO) related transient capital flows under the Application Supported by Blocked Amount (ASBA) mechanism. Products Forward foreign exchange contracts with rupee as one of the currencies and foreign currency-INR options. Foreign Curr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng hedges plus the derivatives contracts cancelled across all AD category banks is within the market value of its investments. ii. The FPI should also provide a quarterly declaration to the custodian bank that the total amount of derivatives contract booked across AD Category banks are within the market value of its investments. iii. The hedges taken with AD banks other than designated AD banks have to be settled through the Special Non-Resident Rupee A/c maintained with the designated bank thro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rations are being undertaken against specific mandates obtained from their clients. b) AD Category I banks may undertake periodic reviews, at least at quarterly intervals, on the basis of market price movements, fresh inflows, amounts repatriated and other relevant parameters to ensure that the forward cover outstanding is supported by underlying exposures. In this context, it is clarified that in case an FPI intends to hedge the exposure of one of its sub-account holders, (cf paragraph 4 of sch .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he portfolio, for reasons other than sale of securities, the hedge may be allowed to continue till the original maturity, if so desired. d) Forward contracts booked by FPIs, once cancelled, can be rebooked up to the extent of 10 per cent of the value of the contracts cancelled. The forward contracts booked may, however, be rolled over on or before maturity. e) Forward contracts booked for hedging coupon receipts as indicated in para. (1)(ii) above shall not be eligible for rebooking on cancellat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

should not exceed the amount proposed to be invested in the IPO. iii. The tenor of the swap should not exceed 30 days. iv. The contracts, once cancelled, cannot be rebooked. Rollovers under this scheme will also not be permitted. i) FPIs and other foreign investor are free to remit funds through any bank of its choice for any transaction permitted under FEMA, 1999 or the Regulations / Directions framed thereunder. The funds thus remitted can be transferred to the designated AD Category -I custo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ving bank is required to issue FIRC to the bank receiving the proceeds to establish the fact the funds had been remitted in foreign currency. 2. Terms and conditions for Foreign Portfolio Investors participating in the Exchange Traded Currency Derivatives (ETCD) [Refer Part A, sub-paragraphs (4) & (5)] Foreign portfolio investors (FPIs) eligible to invest in securities as laid down in Schedules 2, 5, 7 and 8 of the Foreign Exchange Management (Transfer or Issue of Security by a person reside .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

can participate in the currency futures / exchange traded options market through any registered / recognised trading member of the exchange concerned. c. FPIs can take position - both long( bought) as well as short(sold) - in USD-INR pair upto USD 15 million per exchange. In addition, they shall be allowed to take long as well as short positions in EUR-INR, GBP-INR and JPY-INR pairs, all put together, upto USD 5 million equivalent per exchange. For the convenience of monitoring, exchanges may pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

any exchange, it will be required to have an underlying exposure. The onus of ensuring the existence of an underlying exposure shall rest with the FPI concerned. e. The exchange will, however, be free to impose additional restrictions as prescribed by the Securities and Exchange Board of India (SEBI) for the purpose of risk management and fair trading. f. The exchange/ clearing corporation will provide FPI wise information on day-end open position as well as intra-day highest position to the res .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

signated custodian bank will be required to monitor this and bring transgressions, if any, to the notice of RBI / SEBI. 3. Facilities for Non-resident Indians (NRIs) Purpose a) To hedge the exchange rate risk on the market value of investment made under the portfolio scheme in accordance with provisions of FERA, 1973 or under notifications issued there under or in accordance with provisions of FEMA, 1999. b) To hedge the exchange rate risk on the amount of dividend due on shares held in Indian c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d to be maintained. 4. Facilities for Hedging Foreign Direct Investment in India Purpose i) To hedge exchange rate risk on the market value of investments made in India since January 1, 1993, subject to verification of the exposure in India ii) To hedge exchange rate risk on dividend receivable on the investments in Indian companies iii) To hedge exchange rate risk on proposed investment in India Products Forward foreign exchange contracts with rupee as one of the currencies and foreign currency .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat the overseas entities have completed all the necessary formalities and obtained necessary approvals (wherever applicable) for the investment. (ii) The tenor of the contracts should not exceed six months at a time beyond which permission of the Reserve Bank would be required to continue with the contract. (iii) These contracts, if cancelled, shall not be eligible to be rebooked for the same inflows. (iv) Exchange gains, if any, on cancellation shall not be passed on to the overseas investor. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Model I Non-resident exporter / importer dealing through their overseas bank (including overseas branches of AD banks in India) Non-resident exporter / importer approaches his banker overseas with appropriate documents with a request for hedging their Rupee exposure arising out of a confirmed import or export order invoiced in Rupees. The overseas bank in turn approaches its correspondent in India (i.e. the AD bank in India) for a price to hedge the exposure of its customer along with documentat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

time document from the overseas bank by the AD bank in India. The AD bank in India based on documents received from the overseas correspondent should satisfy itself about the existence of the underlying trade transaction and offer a forward price (no two-way quotes should be given) to the overseas bank who, in turn, will offer the same to its customer. The AD bank, therefore, will not be dealing directly with the overseas importer / exporter. The amount and tenor of the hedge should not exceed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bject 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. Model II Non-resident exporter .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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. The AD bank may obtain certification of KYC/AML in the format in Annex XVIII. The format can be obtained through the overseas correspondent / bank through SWIFT authenticated message. In case the AD bank has a presence outside India, the AD may take care of the KYC/AML through its bank s offs .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s in India may release funds to the beneficiaries only after sighting funds in Nostro / Vostro accounts. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

banks in India or through their overseas banks on a back to back basis as per operational guidelines, terms and conditions given under (II) below Products Forward foreign exchange contracts with rupee as one of the currencies, foreign currency-INR options and foreign currency-INR swaps. Operational Guidelines, Terms and Conditions The foreign equity holder / overseas organisation or individual approaches the AD bank in India with a request for forward cover in respect of underlying transaction f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ge contract immediately. The amount and tenor of the hedge should not exceed that of the underlying transaction and should be in consonance with the extant regulations regarding tenor of payment / realization of the proceeds. On due date, settlement is to be done through the correspondent bank s Vostro or the AD bank s Nostro accounts. AD banks in India may release funds to the beneficiaries only after sighting funds in Nostro / Vostro accounts. The contracts, once cancelled, cannot be rebooked. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h AD Category- I banks in India through their overseas banks on a back to back basis. Products: Foreign currency-INR swaps Operational Guidelines, Terms and Conditions (i) The recognised non-resident lender approaches his overseas bank with appropriate documentation as evidence of an underlying ECB denominated in INR with a request for a swap rate for mobilising INR for onward lending to the Indian borrower. (ii) The overseas bank, in turn, approaches an AD Cat-I bank for a swap rate along with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aken by the AD bank in India as a one-time document from the overseas bank. (iv) Based on the documents received from the overseas bank, the AD bank in India should satisfy itself about the existence of the underlying ECB in INR and offer an indicative swap rate to the overseas bank which, in turn, will offer the same to the non-resident lender on a back-to-back basis. (v) The continuation of the swap shall be subject to the existence of the underlying ECB at all times. (vi) On the due date, set .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

side India other than a FPI, once cancelled, are not eligible to be rebooked. SECTION III Facilities for Authorised Dealers Category-I 1. Management of Banks Assets-Liabilities Users - AD Category I banks Purpose - Hedging of interest rate and currency risks of foreign exchange asset-liability portfolio Products - Interest Rate Swap, Interest Rate Cap/Collar, Currency Swap, Forward Rate Agreement. AD banks may also purchase call or put options to hedge their cross currency proprietary trading po .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d to market at regular intervals. d) The net cash flows arising out of these transactions are booked as income/ expenditure and reckoned toward foreign exchange position, wherever applicable. 2. Hedging of Gold Prices Users - i. Banks authorised by the Reserve Bank to operate the Gold Deposit Scheme ii. Banks, which are allowed to enter into forward gold contracts in India in terms of the guidelines issued by the Department of Banking Regulation (including the positions arising out of inter-bank .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing sale, purchase and loan transactions in gold with them, subject to the conditions specified by the Reserve Bank in this regard. The tenor of such contracts should not exceed six months. 3. Hedging of Capital Users - Foreign banks operating in India Product - Forward foreign exchange contracts Operational Guidelines, Terms and Conditions a) Tier I capital - i) The capital funds should be available in India to meet local regulatory and CRAR requirements and, hence, these should not be parked i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t swapped into rupees at all times in terms of DBOD circular No.IBS.BC.65 /23.10.015/2001-02 dated February 14, 2002. Banks are not permitted to enter into foreign currency-INR swap transactions involving conversion of fixed rate rupee liabilities in respect of Innovative Tier I/Tier II bonds into floating rate foreign currency liabilities. 4. Participation in the currency futures market in India Please refer to Part-A Section I, paragraph 4. In continuation of the same: a) AD Category I Banks m .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r last 3 years. The AD Category - I banks which fulfill the prudential requirements should lay down detailed guidelines with the approval of their Boards for trading and clearing of currency futures contracts and management of risks. (c). AD Category - I banks which do not meet the above minimum prudential requirements and AD Category - I banks which are Urban Co-operative banks or State Co-operative banks can participate in the currency futures market only as clients, subject to approval and di .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es for the purpose of risk management and preserving market integrity. (f) AD Category-I banks may also net / offset their positions in the ETCD market against the positions in the OTC derivatives markets. Keeping in view the volatility in the foreign exchange market, Reserve Bank may however stipulate a separate sub-limit of the NOPL (as a percentage thereof) exclusively for the OTC market as and when required. 5. Participation in the exchange traded currency options market in India Please refe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ars. The AD Category - I banks, which fulfil the prudential requirements, should lay down detailed guidelines with the approval of their Boards for trading and clearing of the exchange traded currency options contracts and management of risks. b) AD Category - I banks, which do not meet the above minimum prudential requirements and AD Category - I banks, which are Urban Co-operative banks or State Co-operative banks, can participate in the exchange traded currency options market only as clients, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on-residents and is, therefore, subject to the regulations applicable to transfers in foreign currency. (ii) Debit to the account of a non-resident bank is in effect an inward remittance in foreign currency. 2. Rupee Accounts of Non-Resident Banks AD Category I banks may open/close Rupee accounts (non-interest bearing) in the names of their overseas branches or correspondents without prior reference to the Reserve Bank. Opening of Rupee accounts in the names of branches of Pakistani banks operat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Reserve Bank. NOTE: Forward purchase or sale of foreign currencies against Rupees for funding is prohibited. Offer of two-way quotes in Rupees to non-resident banks is also prohibited. 4. Transfers from other Accounts Transfer of funds between the accounts of the same bank or different banks is freely permitted. 5. Conversion of Rupees into Foreign Currencies Balances held in Rupee accounts of non-resident banks may be freely converted into foreign currency. All such transactions should be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es that the refunds are not being made in cover of transactions of compensatory nature. 8. Overdrafts / Loans to Overseas Branches/ Correspondents (i) AD Category I banks may permit their overseas branches/ correspondents temporary overdrawals not exceeding ₹ 500 lakhs in aggregate, for meeting normal business requirements. This limit applies to the amount outstanding against all overseas branches and correspondents in the books of all the branches of the authorised AD Category I bank in I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of (i) above to overseas banks should seek prior approval from the Chief General Manager, Reserve Bank of India, Financial Markets Regulation Department, Central Office, 23rd Floor, Mumbai, 400001. 9. Rupee Accounts of Exchange Houses Opening of Rupee accounts in the names of Exchange Houses for facilitating private remittances into India requires approval of the Reserve Bank. Remittances through Exchange Houses for financing trade transactions are permitted upto ₹ 15,00,000 per transacti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

egory I banks may freely undertake foreign exchange transactions as under: a) With AD Category I banks in India: (i) Buying/Selling/Swapping foreign currency against Rupees or another foreign currency. (ii) Placing/Accepting deposits and Borrowing/Lending in foreign currency. b). With banks overseas and Off-shore Banking Units in Special Economic Zones (i) Buying/Selling/Swapping foreign currency against another foreign currency to cover client transactions or for adjustment of own position, (ii .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

banks may maintain balances in foreign currencies up to the levels approved by the Board. They are free to manage the surplus in these accounts through overnight placement and investments with their overseas branches/correspondents subject to adherence to the gap limits approved by the Reserve Bank. (ii) AD Category I banks are free to undertake investments in overseas markets up to the limits approved by their Board. Such investments may be made in overseas money market instruments and/or debt .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

life to maturity does not exceed one year as on the date of purchase. (iii) AD Category I banks may also invest the un-deployed FCNR (B) funds in overseas markets in long-term fixed income securities subject to the condition that the maturity of the securities invested in do not exceed the maturity of the underlying FCNR (B) deposits. (iv) Foreign currency funds representing surpluses in the nostro accounts may be utilised for: a) making loans to resident constituents for meeting their foreign .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Bank (Department of Banking Regulation). (v) AD Category I banks may write-off/transfer to unclaimed balances account, un-reconciled debit/credit entries as per instructions issued by Department of Banking Regulation, from time to time. 5. Loans/Overdrafts a) All categories of overseas foreign currency borrowings of AD Category I banks, (except for borrowings at (c) below), including existing External Commercial Borrowings and loans/overdrafts from their Head Office, overseas branches and corres .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

their branches/correspondents abroad and also includes overseas borrowings in gold for funding domestic gold loans (cf. DBOD circular No. IBD.BC. 33/23.67.001/2005-06 dated September 5, 2005). If drawals in excess of the above limit are not adjusted within five days, a report, as per the format in Annex-VIII, should be submitted to the Chief General Manager, Reserve Bank of India, Financial Markets Regulation Department Central Office, Mumbai 400001, within 15 days from the close of the month in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

002-03 dated January 31,2003. Any fresh borrowing above this limit shall be made only with the prior approval of the Reserve Bank. Applications for fresh ECBs should be made as per the current ECB Policy. c) The following borrowings would continue to be outside the limit of 100 per cent of unimpaired Tier I capital or USD 10 million (or its equivalent), whichever is higher: i).Overseas borrowings by AD Category I banks for the purpose of financing export credit subject to the conditions prescrib .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed July 21, 2006 and Perpetual Debt Instruments and Debt Capital Instruments in foreign currency issued in terms of circular DBOD.No.BP.BC.98/21.06.201/2011-12 dated May 2, 2012. iv) Any other overseas borrowing with the specific approval of the Reserve Bank. d) Interest on loans/overdrafts may be remitted (net of taxes) without the prior approval of Reserve Bank. e) 6AD category-I banks may borrow only from International / Multilateral Financial Institutions in which Government of India is a sh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) The bank should maintain a CRAR of 12.0 per cent. (iii) The borrowings beyond the existing ceiling shall be with a minimum maturity of three years. (iv) All other existing norms (FEMA regulations, NOPL norms, etc) shall continue to be applicable. PART D REPORTS TO THE RESERVE BANK i) The Head/Principal Office of each AD Category-I banks should submit daily statements of Foreign Exchange Turnover in Form FTD and Gaps, Position and Cash Balances in Form GPB through the Online Returns Filing Syst .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

i) AD Category-I banks should consolidate the data on cross currency derivative transactions undertaken by residents and submit half-yearly reports (June and December) as per the format indicated in the Annex-IV. The report may also be forwarded by e-mail to fmrdfx@rbi.org.in so as to reach the Department by the 10th of the following month. iv) AD Category-I banks should forward details of exposures in foreign exchange as at the end of every quarter as per the format indicated in Annex-V. ADs sh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n the report. The AD banks should submit this report based on bank's books and not based on corporate returns. v) Authorised Dealers Category I should forward details of option transactions (FCY-INR) undertaken on a weekly basis as per the format indicated in Annex VIII. The report may also be forwarded by e-mail to fmrdfx@rbi.org.in so as to reach the Department by the 10th of the following month. v) AD Category-I banks have to report their total outstanding foreign currency borrowings unde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

formance basis, as per the format in Annex-X. The report may also be forwarded by e-mail to fmrdfx@rbi.org.in so as to reach the Department by the 10th of the following month. vii) The Head/Principal Office of each AD Category-I banks should submit a statement in form BAL giving details of their holdings of all foreign currencies on fortnightly basis through Online Returns Filing System (ORFS) within seven calendar days from the close of the reporting period to which it relates. viii) A monthly .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s, which are maintaining Rupee accounts of non-resident banks as at the end of December every year giving their code numbers allotted by Reserve Bank. The list should be submitted before 15th January of the following year. The offices/branches should be classified according to area of jurisdiction of Reserve Bank Offices within which they are situated. The report may also be forwarded by e-mail to fmrdfx@rbi.org.in so as to reach the Department by the 10th of the following month. x) AD Category .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reports as per the format indicated in the Annex XIX. The report may also be forwarded by e-mail to fmrdfx@rbi.org.in so as to reach the Department by the 10th of the following month. xii) Authorised Dealers should report on a quarterly basis, doubtful transactions involving frequent cancellation of hedge transactions and / or the underlying trade transactions by non-residents under the scheme as per the format indicated in the Annex XX. The report may also be forwarded by e-mail to fmrdfx@rbi. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ised Dealers would be dual in nature. i. Net Overnight Open Position Limit (NOOPL) for calculation of capital charge on forex risk. ii. Limit for positions involving Rupee as one of the currencies (NOP-INR) for exchange rate management. For banks incorporated in India, the exposure limits fixed by the Board should be the aggregate for all branches including their overseas branches and Off-shore Banking Units. For foreign banks, the limits will cover only their branches in India. i. Net Overnight .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rrency. The open position in a currency is the sum of (a) the net spot position, (b) the net forward position and (c) the net options position. a) Net Spot Position The net spot position is the difference between foreign currency assets and the liabilities in the balance sheet. This should include all accrued income/expenses. b) Net Forward Position This represents the net of all amounts to be received less all amounts to be paid in the future as a result of foreign exchange transactions which h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rincipal on currency futures/swaps. c) Net Options Position The options position is the "delta-equivalent" spot currency position as reflected in the authorized dealer's options risk management system, and includes any delta hedges in place which have not already been included under 1(a) or 1(b) (i) and (ii) above. 2. Calculation of the Overall Net Open Position This involves measurement of risks inherent in a bank's mix of long and short position in different currencies. It ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ge contracts should be reported on the basis of Present Value (PV) adjustment. iv. Arrive at the sum of all the net short positions. v. Arrive at the sum of all the net long positions. Overall net foreign exchange position is the higher of (iv) or (v). The overall net foreign exchange position arrived at as above must be kept within the limit approved by the bank s Board. Note: Authorised Dealer banks should report all derivative transactions including forward exchange contracts on the basis of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

res. The aggregate limit (on-shore + off-shore) may be termed Net Overnight open Position (NOOP) and will be subjected to capital charge. Accumulated surplus of foreign branches need not be reckoned for calculation of open position. An illustrative example is as follows: If a bank has, let us say three foreign branches and the three branches have open position as below- Branch A: + ₹ 15 crores Branch B: + ₹ 5 crores Branch C: - ₹ 12 crores The open position for the overseas bra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rized Dealers till the end of business day may be computed for calculation of Foreign Exchange Exposure Limits. The transactions undertaken after the end of business day may be taken into the positions for the next day. The end of day time may be approved by the bank s Board. ii. Limit for positions involving Rupee as one of the currencies (NOP-INR) for exchange rate management a. NOP-INR may be prescribed to Authorised Dealers at the discretion of the Reserve Bank of India depending on the mark .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

are to be monitored by the banks with proper audit trail. Such breaches should also be regularized and ratified by appropriate authorities (ALCO / Internal Audit Committee). B. Aggregate Gap Limits (AGL) i. AGL may be fixed by the boards of the respective banks and communicated to the Reserve Bank immediately. However, such limits should not exceed 6 times the total capital (Tier I and Tier II capital) of the bank. ii. However, Authorised Dealers which have instituted superior measures such as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ports are given below. AD Category-I banks may ensure that the reports are properly compiled on the basis of these guidelines: The data for a particular date has to reach us by the close of business of the following working day. FTD 1. SPOT - Cash and tom transactions are to be included under Spot transactions. 2. SWAP - Only foreign exchange swaps between authorised dealers category-I should be reported under swap transactions. Long term swaps (both cross currency and foreign currency-Rupee swa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ised dealers category-I (adding to the supply in the market). On the sale side of cancelled forward contracts, aggregate of the cancelled forward purchase contracts should be indicated (adding to the demand in the market). 4 FCY/FCY transactions - Both the legs of the transactions should be reported in the respective columns. For example in a EUR/USD purchase contract, the EUR amount should be included in the purchase side while the USD amount should be included in the sale side. 5. Transactions .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s. Crore. The net overnight open position should be calculated on the basis of the instructions given in Annex I. 3. Of the above FCY/INR- The amount to be reported is the position against the Rupee- i.e. the net overnight open exchange position less cross currency position, if any. Formats of FTD and GPB Statements FTD Statement showing daily turnover of foreign exchange dated……… Merchant Inter bank Spot, Cash, Ready, T.T. etc. Forwards Cancellation of Forwards Spot Swap Fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

VI months Annex III [see Part D ,paragraph (ii)] Statement of Nostro/Vostro Balances for the month of Name & address of the Authorised Dealer Category-I bank…….. Sr. No. Currency Net balance in Nostro Account Net balance in Vostro Account. 1 USD 2 EUR 3 JPY 4 GBP 5 INR 6 Other currencies (in US $ million) Note: In case the variation in each item above (given at 1 to 5) exceeds 10% in a month, the reason may be given briefly, as a footnote. This statement should be addressed to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or collars (Purchases) Forward rate agreements Any other product as permitted by Reserve Bank from time to time Annex VI [See Part A Section 1 paragraph 2(g)(ii)] Format of Declaration of amounts booked/cancelled under Past Performance facility [On letterhead of the Company] Date : To, (Name and address of the Bank) Dear Sir, Sub : Declaration of amounts booked/cancelled under Past Performance facility We refer to the facility of booking of Forward or Option Contracts involving Foreign Exchange .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ip;………………………. Please find below the information regarding amounts booked / cancelled with all AD Category I Banks under the said past performance facility as permitted under the FEMA Regulations : (Amount in US dollar) Eligible limit under past performance Aggregate amount of contracts booked with all the ADs from April till date Amount of contracts cancelled with all ADs from April till date _______ Amount of contracts o/s with all .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on for utilisation of past performance limits in excess of 50 per cent and details of import / export turnover, overdues, etc. 1. The value of the outstanding forward cover availed by us under the past performance route as on [date] is [ ] per cent of our eligibility for our imports [exports]. 2. We certify that all guidelines in respect of hedging of probable exposures under the past performance route have been complied with while utilizing this facility. 3. We declare that the information in t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Import Year 1 Year 2 Year 3 Yours faithfully, For XXXXXX (Chief Financial Officer) (Company Secretary) Annex VIII [see Part D , paragraph (v)] FCY/Rupee Option transactions [For the week ended__________________] A. Option Transaction Report Sr. no Trade date Client/ C-party Name Notional Option Call/ Put Strike Maturity Premium Purpose* *Mention balance sheet, trading or client related. II. Option Positions Report Currency Pair Notional Outstanding Net Portfolio Delta Net Portfolio Gamma Net Por .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rms = Similarly, Change in delta for a 0.25% change in spot (FCY appreciation & depreciation separately) in INR terms for other currency pairs, such as EUR-INR, JPY-INR etc. IV. Strike Concentration Report Maturity Buckets Strike Price 1 week 2 weeks 1 month 2 months 3 months > 3 months This report should be prepared for a range of 150 paise around current spot level. Cumulative positions to be given. All amounts in USD million. When the bank owns an option, the amount should be shown as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ra 5 (a) of Master Circular on Risk Mgmt. and Inter-Bank Dealings dated July 1, 2009 Borrowings in excess of the above limit for replenishment. Of Rupee resources @ External Commercial Borrowings Borrowings under following scheme as per IECD Master Circular on Export Credit in Foreign Currency dated July 1, 2003 & Regulation 4.2(iv) of Notification No. FEMA 3/2000-RB dated May 3, 2000 (a) Lines of Credit for extending Pre-Shipment Credit in Foreign Currency (PCFC) (b) Bankers Acceptance Faci .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sing rates on the date of report may be used for conversion purpose. @ 2. Facility since withdrawn vide para 4 of AP(DIR Series) Circular No. 81 dated March 24, 2004. Annex X [See Part A, Section I, paragraph 1 (ii) (l)] Booking of forward contracts on past performance basis- Report as on ………………………….. Name of the Bank- (in USD million) Total Limits sanctioned during the month(1) Cumulative sanctioned limits(2) Amount of contra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng amounts at the end of each financial year shall be carried over and taken into account in the next year s limit and therefore shall be included while computing the eligible limits for the next year. Annex XI [See Part A, Section I, paragraph 5 A (i)] A. Hedging of Commodity Price Risk in the International Commodity Exchanges/ Markets 1. AD Category I banks can grant permission to companies to hedge the price risk in respect of any commodity (except gold, platinum and silver) in the internatio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on only where it is exposed to price risk. 3. Before permitting unlisted companies to undertake hedge transactions in respect of price risk on import/ export of commodities, Authorized Dealer would require them to submit a brief description of the hedging strategy proposed, namely: description of business activity and nature of risk, instruments proposed to be used for hedging, the names of the commodity exchanges and brokers through whom the risk is proposed to be hedged and the credit lines pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ignations of officials authorized to undertake transactions and limits 4. Authorised Dealers may refuse to undertake any hedge transaction if it has a doubt about the bonafides of the transaction or the corporate is not exposed to price risk. The conditions subject to which ADs would grant permission to hedge and the guidelines for monitoring of the transactions are given below. It is clarified that hedging the price risk on domestic sale/purchase transactions in the international exchanges/mark .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the names of the corporates to whom they have granted permission for commodity hedging and the name of the commodity hedged. 6. Applications from customers to undertake hedge transactions not covered under the delegated authority may continue to be forwarded to the Reserve Bank by the Authorised Dealers Category I, for approval. Conditions/ Guidelines for undertaking hedging transactions in the international commodity exchanges/ markets 1. The focus of hedge transactions shall be on risk contain .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion with an opposite transaction with the same broker. 3. The corporate/firm should open a Special Account with the Authorised Dealer Category-I bank. All payments/receipts incidental to hedging may be effected by the Authorised Dealer Category-I through this account without further reference to the Reserve Bank. 4. A copy of the Broker s Month-end Report(s), duly confirmed/countersigned by the corporate s Financial Controller should be verified by the bank to ensure that all off-shore position .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is regard will be that of the Authorised Dealer Category I. 7. An annual certificate from Statutory Auditors should be submitted by the company/firm to the Authorised Dealer Category I. The certificate should confirm that the prescribed terms and conditions have been complied with and that the corporate/firm s internal controls are satisfactory. These certificates may be kept on record for internal audit/inspection. B. Hedging of commodity price risk on petroleum & petroleum Products by dome .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

isks contained; sanction of the company's Board has been obtained for the specific activity and also for dealing in OTC markets; the Board approval must include explicitly the mark-to-market policy, the counterparties permitted for OTC derivatives, etc.; and domestic crude oil companies should have put up the list of OTC transactions to the Board on a half yearly basis, which must be evidenced by the AD Category I bank before permitting continuation of hedging facilities under this scheme. 3 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

exchanges/markets. Applications for commodity hedging of companies/ firms which are not covered by the delegated authority of Authorised Dealers Category I may be forwarded to the Reserve Bank for consideration through the International Banking Division of an AD bank along with specific recommendation giving the following details: 1. A brief description of the hedging strategy proposed, namely: description of business activity and nature of risk, instruments proposed to be used for hedging, nam .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

es to be followed with respect to revaluation and/or monitoring of positions names and designations of officials authorized to undertake transactions and limits 3. Any other relevant information. A one-time approval will be given by Reserve Bank along with the guidelines for undertaking this activity. Annex XIII [see Part A ,Section II, paragraph 1] Statement - Details of Forward cover undertaken by FPI clients Month - Part A - Details of forward cover (without rebooking) outstanding Name of FPI .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ring the month Cumulative Total - Year to Date During the month Cumulative total - Year to date Name of the AD Category - I bank: Signature of the Authorised official: Date : Stamp : Annex XIV [see Part D, paragraph (x)] Statement - Details of Forward Contracts booked and cancelled under Self-declaration For the Quarter ended - Category Forward Contracts Booked Forward Contracts Cancelled During the Quarter Cumulative total-Year to Date During the Quarter Cumulative total-Year to Date SMEs Indiv .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

p;………………….. b. Address………………………… c. Account No…………………….. d. PAN No…………………………. II. Details of the foreign exchange forward contracts required 1. Amount (Specify currency pair) ………………………… .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lare that the total amount of foreign exchange forward contracts booked with the - (designated branch) of -(bank) in India is within the limit of USD 250,000/- (US Dollar Two lakh and Fifty Thousand only) and certify that the forward contracts are meant for undertaking permitted current and / or capital account transactions. I also certify that I have not booked foreign exchange forward contracts with any other bank / branch. I have understood the risks inherent in booking of foreign exchange fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

esignation of the authorized official: Place: Signature: Date: Stamp and seal * month / year Annex XVI [A. P. (DIR Series) Circular No. 35, dated November 10, 2008] [see Part A, Section I, paragraph 5] Conditions / Guidelines for issuance of standby letter of credit /bank guarantee - commodity hedging transactions 1. AD Category I banks may issue guarantees/standby letters of credit only where the remittance is covered under the delegated authority or under the specific approval granted for over .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ging activities of the company. 4. The standby letter of credit / bank guarantee may be issued for an amount not exceeding the margin payments made to the specific counterparty during the previous financial year. 5. The standby letter of credit / bank guarantee may be issued for a maximum period of one year, after marking a lien on the non-funded facility available to the customer (letter of credit / bank guarantee limit). 6. The bank shall ensure that the guidelines for overseas commodity hedgi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Commodity hedging Users - Listed companies and their subsidiaries/joint ventures/associates having common treasury and consolidated balance sheet or unlisted companies with a minimum net worth of ₹ 200 crore provided a. All such products are fair valued on each reporting date; b. The companies follow the Accounting Standards notified under section 211 of the Companies Act, 1956 and other applicable Guidance of the Institute of Chartered Accountants of India (ICAI) for such products/ contra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ified.) Operational Guidelines, Terms and Conditions b. Writing of options by the users, on a standalone basis is not permitted. Users can however, write options as part of cost reduction structures, provided, there is no net receipt of premium. c. Leveraged structures, Digital options, Barrier options and any other exotic products are not permitted. d. The delta of the options should be explicitly indicated in the term sheet. e. The portion of the structure with the largest notional should be r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rter is an Individual) Registered Address (Permanent Address if non-resident exporter / importer is an Individual) Name of the non-resident exporter s/importer s Bank Non-resident exporter s / importer s Bank Account No. Period of banking relationship with the non-resident exporter/importer * Passport No., Social Security No, or any Unique No. certifying the bonafides of the non-resident exporter/importer as prevalent in the Non-resident exporter s/ importer s country We confirm that all the inf .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rters Forwards FCY-INR options Annex XX Reporting of suspicious transactions undertaken by non-resident importer / exporter - for the quarter ended . Name of the AD Category I Bank - Sl No Name of the non-resident exporter / importer Name of the overseas bank (in case of Model I) No. of derivative transactions cancelled along with cancellation of the underlying trade transaction and amount involved Action taken by the AD Cat I bank Appendix List of Circulars/Notifications which have been consoli .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

October 21, 2003 10. Notification No. FEMA 127/2005-RB January 5, 2005 11. Notification No. FEMA 143/2005-RB December 19, 2005 12. Notification No. FEMA 147/2006-RB March 16, 2006 13. Notification No. FEMA 148/2006-RB March 16, 2006 14. Notification No. FEMA 159/2007-RB September 17, 2007 15. Notification No. FEMA 177/2008-RB August 1, 2008 16. Notification No. FEMA 191/2009-RB May 20, 2009 17. Notification No. FEMA 201/2009-RB November 5, 2009 18. Notification No. FEMA 210/2010-RB July 19, 2010 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r No. 28 October 17, 2003 6. A.P.(DIR Series) Circular No. 46 December 9, 2003 7. A.P.(DIR Series) Circular No. 47 December 12, 2003 8. A.P.(DIR Series) Circular No. 81 March 24, 2004. 9. A.P.(DIR Series) Circular No 26 November 1, 2004 10. A.P.(DIR Series) Circular No 47 June 23, 2005 11. A.P.(DIR Series) Circular No 03 July 23, 2005 12. A.P.(DIR Series) Circular No 25 March 6, 2006 13. EC.CO.FMD. No.8 /02.03.75/2002-03 February 4, 2003 14. EC.CO.FMD. No.14 /02.03.75/2002-03 May 9, 2003 15. EC. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cular No.76 June 19,2007 25 A.P.(DIR Series) Circular No.15 October 29 ,2007 26 A.P.(DIR Series) Circular No.17 November 6, 2007 27 A.P.(DIR Series) Circular No.47 June 3, 2008 28 A. P. (DIR Series) Circular No. 05 August 6, 2008 29 A.P.(DIR Series) Circular No.23 October 15, 2008 30 A. P. (DIR Series) Circular No.35 November 10, 2008 31 A.P.(DIR Series) Circular No.50 February 4, 2009 32 A.P.(DIR Series) Circular No.27 January 19, 2010 33 A.P.(DIR Series) Circular No.05 July 30, 2010 34 A.P.(DI .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

P.(DIR Series) Circular No.3 July 11, 2012 45 A.P.(DIR Series) Circular No.13 July 31, 2012 46 A.P.(DIR Series) Circular No.21 August 31, 2012 47 A.P.(DIR Series) Circular No.30 September 12, 2012 48 A.P.(DIR Series) Circular No.45 October 22, 2012 49 A.P.(DIR Series) Circular No.86 March 1, 2013 50 A.P. (DIR Series) Circular No.121 June 26, 2013 51 A.P. (DIR Series) Circular No.2 July 4, 2013 52 A.P. (DIR Series) Circular No.7 July 8, 2013 53 A.P. (DIR Series) Circular No.17 July 23, 2013 54 A. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version