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February 2014

A. P. (DIR Series) Circular No. 92 dated 13rd January, 2014

By Gaurang Gandhi, Chartered Accountant
Reading Time 1 mins
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Risk Management and Inter Bank Dealings

Presently, residents (other than exporters and importers) cannot cancel and rebook forward contracts, involving Rupee as one of the currencies, booked by them to hedge current and capital account transactions. Exporters are allowed to cancel and rebook forward contracts to the extent of 50% of the contracts booked in a financial year for hedging their contracted export exposures and importers are allowed to cancel and rebook forward contracts to the extent of 25% of the contracts booked in a financial year for hedging their contracted import exposures.

This circular now permits everyone with a contracted exposure to freely cancel and rebook forward contracts in respect of all current account transactions as well as capital account transactions with a residual maturity of one year or less. In the case of FII/QFI/other portfolio investors, forward contracts booked by them, once cancelled, can be rebooked up to the extent of 10% of the value of the contracts cancelled. However, forward contracts booked by them can be rolled over on or before maturity.

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