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Risk Management and Inter-Bank Dealings Simplified Hedging Facility

FEMA - 11 - Dated:- 9-11-2017 - RBI/2017-18/88 A.P. (DIR Series) Circular No. 11 November 09, 2017 To, All Authorised Dealer Category - I Banks Madam/Sir, Risk Management and Inter-Bank Dealings - Simplified Hedging Facility Attention of Authorised 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, 2000) issued under clause (h) of sub- .....

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April 12, 2017. The facility is being introduced with a view to simplify the process for hedging exchange rate risk by reducing documentation requirements, avoiding prescriptive stipulations regarding products, purpose and hedging flexibility, and to encourage a more dynamic and efficient hedging culture. 3. Necessary amendments (Notification No. FEMA 388/2017-RB dated October 24, 2017) to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. F .....

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n Annex I to this circular and this facility will be effective from January 01, 2018. 5. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers. 6. 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 are without prejudice to permissions/ approvals, if any, required under any other law. Yours faithfully (T Rabi Sankar) Chief General Manager [ .....

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ivalent, on a gross basis. Designated Bank: Any Authorised Dealer Category-I (AD Cat-I) bank designated as such by the user. Operational Guidelines, Terms and Conditions i. The user shall appoint an AD Cat-I bank as its Designated Bank . The designated bank will assess the hedging requirement of the user and set a limit up to the stipulated cap on the outstanding contracts. ii. If hedging requirement of the user exceeds the limit in course of time, the designated bank may re-assess and, at its d .....

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Users may, however, provide basic details of the underlying transaction in a standardised format2, only in the case of OTC hedge contracts. vi. Cancelled contracts may be freely rebooked with the same bank. vii. In case of hedge contracts booked in OTC market, while losses will be recovered from the user, net gains i.e. gains in excess of cumulative losses, if any, will be transferred at the time of delivery of the underlying cash flow. In case of part delivery, net gains will be transferred on .....

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er may be booked under other available hedging facilities. x. Users booking contracts under this facility shall not book contracts under any other facility in OTC or ETCD market except as provided in para (ix). xi. At the end of each financial year, the user will provide the designated bank with a statement signed by the head of finance or the head of the entity, to the effect that, Hedge contracts booked in both OTC and ETCD market, under this facility, are backed by underlying exchange rate ex .....

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