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November 2015

A. P. (DIR Series) Circular No. 20 dated 8th October, 2015

By Gaurang Gandhi Chartered Accountant
Reading Time 1 mins
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Risk Management & Inter-Bank Dealings: Booking of Forward Contracts – Liberalisation

Presently,
to manage/hedge their foreign exchange exposures arising out of actual
or anticipated remittances, both inward and outward, resident
individuals, firms and companies, are allowed to book forward contracts,
without production of underlying documents, up to a limit of US $
250,000 based on self-declaration.

This circular has increased
the said limit to US $ 1 million. Hence, all resident individuals, firms
and companies, who have actual or anticipated foreign exchange
exposures, are now allowed to book foreign exchange forward and FCY-INR
options contracts up to US $ 1,000,000 (US $ one million) without any
requirement of documentation on the basis of a simple declaration.
Although contracts booked under this facility will normally be on a
deliverable basis, cancellation and rebooking of contracts is permitted.
However, depending upon the track record of the entity, the concerned
bank can call for underlying documents, if considered necessary, at the
time of rebooking of cancelled contracts.

The existing
facilities in terms of A.P. (DIR Series) Circular No. 15 dated 29th
October, 2007 for Small and Medium Enterprises (SMEs) will remain
unchanged.

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