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Risk Management and Inter Bank Dealings: Hedging under Past Performance Route- Liberalisation of Documentation Requirements in the OTC market
This circular has revised the documentation process for hedging of probable exposures by exporters and importers based on past performanceas under: –
1. Present position – importers and exporters are required to furnish to their banks a quarterly declaration, in the specified format, duly certified by their Statutory Auditor stating the amounts booked with other banks under this facility.
Change – importers and exporters have to furnish a quarterly declaration stating the amounts booked with other banks under this facility as per the format in Annex I to this circular. The declaration has to be signed by the Chief Financial Officer (CFO) and the Company Secretary (CS). In the absence of a CS, the Chief Executive Officer (CEO) or the Chief Operating Officer (COO) has to co-sign the undertaking along with the CFO.
2. Present position – banks can permit importers and exporters to enter into derivative contracts in excess of 50% of the eligible limit if they are satisfied that the requirements of their customers is genuine and the customer submits the following: –
a. Certificate from their Statutory Auditor that all guidelines have been adhered to while utilising this facility.
b. Certificate of import/export turnover during the past three years duly certified by their Statutory Auditor in the specified format.
Change – banks can permit importers and exporters to enter into derivative contracts in excess of 50% of the eligible limit if they are satisfied that the requirements of their customers is genuine and the customer submits the following certificates as per the format in Annex II to this circular, duely signed by the the CFO and CS (in the absence of a CS, the Chief Executive Officer (CEO) or the Chief Operating Officer (COO) has to co-sign the undertaking along with the CFO): –
a. Declaration that all guidelines have been adhered to while utilising this facility.
b. Certificate of import/export turnover of the customer during the past three years.
3. The statutory auditor, as part of the annual audit exercise, has to certify the following: –
a. The amounts booked with all banks under this facility.
b. All guidelines have been adhered to while utilising this facility over the past financial year.
