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Risk Management and Inter-Bank Dealings – Facilities for Hedging Trade Exposures invoiced in Indian Rupees

FEMA - 08 - Dated:- 12-10-2017 - RBI/2017-18/75 A.P. (DIR Series) Circular No. 08 October 12, 2017 To All Authorized Dealer Category - I Banks Madam / Sir, Risk Management and Inter-Bank Dealings - Facilities for Hedging Trade Exposures invoiced in Indian Rupees Attention of Authorized Dealers Category - I (AD Category - I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 (Notification No. FEMA. 25/RB-2000 dated May 3 .....

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being a group entity) of such non-residents to undertake hedges for and behalf of such non-residents with AD Category I banks in India as per the existing Model I and Model II. The revised operational guidelines, terms and conditions are placed at Annex to this circular. 3. The directions contained in this circular have been issued under Sections 10 (4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under .....

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Category I banks can opt for either Model I or Model II as given below: Model I Non-resident exporter / importer or its central treasury (of the group and being a group entity) dealing through their overseas bank (including overseas branches of AD banks in India) i. Non-resident exporter / importer, or its central treasury 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. .....

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n India b If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately c In case of a central treasury, an authorization from the entity having INR exposure to hedge on its behalf iii. A certification on the end client KYC may also be taken as a one-time document from the overseas bank by the AD bank in India. iv. The AD bank in India based on documents received from the overseas correspondent should satisfy itself about the existence of the underlying trade t .....

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spondent bank s Vostro or the AD bank s Nostro accounts. vii. The contracts, once cancelled, cannot be rebooked. viii. The contracts may, however, be rolled over on or before maturity subject to maturity of the underlying exposure. ix. 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 of the underlying exposure. x. I .....

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hes the AD bank in India with a request for forward cover in respect of underlying transaction for which he furnishes appropriate documentation (scanned copies would be acceptable), on a pre-deal basis to enable the AD bank in India to satisfy itself that there is an underlying trade transaction, and details of his overseas banker, address etc. The following undertakings also need to be taken from the customer a That the same underlying exposure has not been hedged with any other AD Category I b .....

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