TMI BlogPermitting writing of options against contracted exposures by Indian ResidentsX X X X Extracts X X X X X X X X Extracts X X X X ..... nter (OTC) Foreign Exchange Derivatives and Overseas Hedging of Commodity Price and Freight Risks, as amended from time to time. Attention is also invited to Reserve Bank circular No. DBOD.No.BP.BC. 86/21.04.157/2006-07 dated April 20, 2007 on Comprehensive Guidelines on Derivatives as well as the modifications issued through circular No. DBOD.No.BP.BC. 44/21.04.157/2011-12 dated November 2, 2011. 2. As announced in the Bi-Monthly Monetary Policy Statement on April 7, 2015, in order to encourage participation in the Over the Counter (OTC) currency options market and improve its liquidity, it has been decided to permit resident exporters and importers of goods and services to write (sell) standalone plain vanilla European call and put opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies 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 appropriate disclosures are made in the financial statements as prescribed by the Institute of Chartered Accountants of India (ICAI). 2. Product a. Covered Call: A resident exporter may write (sell) a standalone plain vanilla European call option contract to an AD Category-I bank in India against the cover of contracted exposure arising out of exports of goods and services from India. b. Covered Put: A resident importer may write (sell) a standalone plain vanilla European put option contract to an AD Category-I bank in India against the cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover, etc. depending on the scale of forex operations and risk profile of the option writers. d. Covered options may be written against either a portion or the full value of the underlying. e. AD Cat-I banks shall treat the exposures against which a covered option has been written as an unhedged exposure . Accordingly, the guidelines issued vide Reserve Bank Circular DBOD.No.BP.BC. 85/21.06.200/2013-14 dated January 15, 2014 on Capital and Provisioning Requirements for Exposures to entities with Unhedged Foreign Currency Exposure shall apply. f. Covered option contracts may be written for a period up to the maturity of the underlying subject to a maximum maturity period of 12 month. g. Covered options may be fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.P. (DIR Series) No. 32 dated December 28, 2010 , as amended from time to time, shall be applicable, mutatis mutandis, to covered options. Annex II to A.P. (DIR Series) Circular No. 78 dated June 23, 2016 Notification No. FEMA.365/2016-RB June 1, 2016 Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2016 G.S.R. 571(E) .-In exercise of the powers conferred by clause (h) of sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) , the Reserve Bank hereby makes the following amendments in the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 ( Notification No.FEMA 25/2000-RB dated 3rd May 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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