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RBI/2006-07/208
A.P. (DIR Series) Circular No. 22
December 13, 2006
To
All Category - I Authorised Dealer
Banks
Madam/Sir,
Booking of Forward Contracts Based
on Past Performance
Attention of Authorised Dealer
Category - I (AD Category - I) banks is
invited to A.P.(DIR Series)
Circular No.19 dated January 24, 2002, A.P.(DIR
Series) Circular No.63 dated December 21, 2002 and A.P.
(DIR Series) Circular No.26 dated November 1, 2004. At present, AD Category
- I banks may allow importers and exporters to book forward contracts on the
basis of a declaration of an exposure and based on past performance upto the
average of the previous three financial years (April to March) actual import/export
turnover or the previous year’s actual import/export turnover, whichever is
higher, subject to the specified conditions. Forward contracts booked in excess
of 25 per cent of the eligible limit shall be on a deliverable basis and cannot
be cancelled. The aggregate forward contracts booked during the year and outstanding
at any point of time should not exceed the eligible limit. Further, the eligible
limits are to be computed separately for import and export transactions.
2. As announced in the Mid-term
Review of Annual Policy for the Year 2006-07 (para 105), with a view to
providing greater flexibility to importers and exporters it has been decided
to further liberalise the above facility. Accordingly, the forward contracts
booked on the basis of declaration of exposures by importers/exporters and based
on past performances in excess of 50 per cent of the eligible limit shall be
on a deliverable basis and cannot be cancelled. All other conditions and reporting
requirements prescribed for this facility will remain unchanged.
3. AD Category - I banks may
bring the contents of this circular to the notice of their constituents and
customers.
4. The direction contained in this
circular has 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 any other law.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager-In-Charge
Master Circular
A 2. AD banks may also allow
importers and exporters to book forward contracts on the basis of a declaration
of an exposure and based on past performance upto the average of the previous
three financial years’ (April to March) actual import/export turnover or the
previous year’s actual import/export turnover, whichever is higher, subject
to the following conditions:
a) The forward contracts booked
in the aggregate during the year and outstanding at any point of time should
not exceed the eligible limit i.e the average of the previous three financial
years’ (April to March) actual import/ export turnover or the previous year’s
actual import/export turnover, whichever is higher. Contracts booked in excess
of 25 per cent of the eligible limit will be on deliverable basis and cannot
be cancelled. These limits shall be computed separately for import/export transactions.
b) Any forward contract booked
without producing documentary evidence will be marked off against this limit.
c) Importers and exporters should
furnish a declaration to the AD banks regarding amounts booked with other authorised
dealers category-I under this facility.
d) An undertaking may be taken
from the customer to produce supporting documentary evidence before the maturity
of the forward contract.
e) Outstanding forward contracts
higher than 50 per cent of the eligible limit may be permitted by the AD bank
on being satisfied about the genuine requirements of their constituents after
examination of the following documents:
I) A certificate from the Chartered
Accountant of the customer that all guidelines have been adhered to while utilizing
this facility.
II) A certificate of import/export
turnover of the customer during the past three years duly certified by their
Chartered Accountant/bank in the format given in Annex-VI.
f) In the case of an exporter,
the amount of overdue bills should not be in excess of 10 per cent of the turnover,
to avail the above facility.
g) AD banks are required to submit
a monthly report (as on the last Friday of every month) on the limits granted
and utilized by their constituents under this facility in the format given in
Annex-IX. The report may be forwarded to The Chief General Manager, Reserve
Bank of India, Foreign Exchange Department, Forex Markets Division, Central
Office, Mumbai-400 001.
NOTE: Limits specified in paragraph
A.2 pertain to forward contracts booked on the basis of declaration of an exposure.
When forward contracts are booked by the AD bank after verification of documentary
evidence, these limits are not applicable and such contracts may be booked up
to the extent of the underlying.
A.P.(DIR Series) Circular No.63
December 21, 2002
Risk Management and Inter Bank Dealings
Attention of Authorised dealers is invited to A.P.(DIR
Series) Circular No.19 dated January 24, 2002 and subsequent amendments
referred to in the following paragraphs. It has been decided to permit the following
further relaxations:
3. Booking
of forward contracts based on past performance
In terms of our circular No. EC.CO.FMD/453/02.03.75/2001-02
dated December 1, 2001, Authorised dealers are permitted to offer forward contracts
to their exporter/importer customers upto the limit/s worked out on the basis
of last 3 years’ average import/export performance. This is subject to the condition
that at any point of time forward contracts so booked and outstanding shall
not exceed 25 per cent of the eligible limit, within a cap of USD 50 million.
It has been decided to enhance the cap to USD 100
million. Accordingly, Authorised dealers may permit their customers to book
forward contracts upto the eligible limit, subject to the condition that forward
contracts outstanding at any point of time shall not exceed 25 per cent of the
eligible limit, within the cap of USD 100 million. It may be noted that the
eligible limits are to be computed separately for import and export transactions.
All other conditions remain unchanged.
(Also Refer A.P.(DIR
Series) Circular No.93 dt 05-04-03)
4. Booking and cancelling of forward contracts
Authorised dealers were permitted, vide circulars
EC.CO.FMD.790/02.03.75/2001-02 dated March 26, 2002 and EC.CO.FMD.2/02.03.75/2002-03
dated July 31, 2002, to allow resident entities to rebook cancelled contracts
covering all transactions subject to certain conditions. While detailed instructions
were issued for calculating the eligible limit, it was indicated that irrespective
of the eligibility, there would be a cap of USD 100 million per financial year
for a customer.
It has been decided to withdraw this cap. Accordingly,
Authorised dealers are free to offer this facility of rebooking of cancelled
contracts to all foreign exchange exposures falling due within one year.
However, this facility may be made available only to customers who submit details
of exposure to the authorised dealers as per the revised format enclosed.
Forward contracts booked to cover exposures
falling due beyond one year and long term foreign currency-rupee swaps, once
cancelled, cannot be rebooked. Authorised dealers may continue to offer
this facility without any restrictions in respect of export transactions.
A.P.(DIR Series) Circular No.19
January 24, 2002
Risk Management and Inter-Bank Dealings
Attention of authorised dealers is invited to the
Reserve Bank Notification No. FEMA/25/2000-RB dated May 3, 2000.
2. Directions relating to forward exchange
cover and other derivative products, Rupee Accounts of non-resident banks and
inter-bank dealings, are contained in the enclosure. These directions supercede
the existing instructions, namely, :
i. Chapter 3 (Part C & D and Annexure
II) of ECM,
ii. Chapter 5 (Part A & B and Annexure)
of ECM,
iii. Instructions contained in A.D.(M.A.
Series) Circular No.1 dated January 19, 2000.
3. Detailed guidelines contained in Part
B and C of the enclosure are being issued as required under Regulation 6 of
the Reserve Bank Notification No. FEMA/5/2000-RB dated May 3, 2000, which permits
authorised dealers to keep deposits with his branch, head office or correspondent
outside India and also to accept deposit kept by a branch or correspondent outside
India of an authorised dealer and hold in its books in India.
PART – A
RISK MANAGEMENT
Section I
Facilities for Residents other than authorised
dealers:
Forward Exchange Contracts
A.1 (i) Authorised dealers may enter
into forward contracts with residents in accordance with the provisions contained
in paragraph 1 of Schedule I to Reserve Bank Notification No. FEMA.25/RB-2000
dated 3rd May 2000.
(ii) While booking contracts
for their constituents, authorised dealers should verify suitable documentary
evidence, irrespective of the underlying transaction being a current account
transaction or a capital account transaction, to ensure that an exposure exists,
to the extent of the amount of cover sought. Full particulars of contract should
be marked on such documents under proper authentication and copies thereof retained
for verification.
A.2 Authorised dealers may also allow importers
and exporters to book forward contract on the basis of a declaration of an exposure
and based on past performance subject to the conditions prescribed by Reserve
Bank of India in this regard.
A.3 A forward contract cancelled with one authorised
dealer can be rebooked with another authorised dealer subject to the following
conditions:
a.the switch is warranted by competitive rates
on offer, termination of banking relationship with the authorised dealer with
whom the contract was originally booked, etc.
b.the cancellation and rebooking are done
simultaneously on the maturity date of the contract
c.the responsibility of ensuring that the
original contract which has been cancelled rests with the authorised dealer
who undertakes rebooking of the contract.
Contracts other than Forward contracts
A.P.(DIR Series) Circular No.93
April 5, 2003
Booking of Forward Contracts Based
on Past Performance
Attention of authorised dealers is invited to circular
No. EC.CO.FMD/453/02.03.75/2001-02 dated December 1, 2001 and paragraph 3 of
A.P.(DIR Series)
Circular No.63 dated December 21, 2002 on the captioned subject. Authorised
dealers are permitted to offer forward contracts to their importer/exporter
constituents on the basis of last 3 years average import/export performance
subject to condition that forward contracts outstanding at any point of time
shall not exceed 25 per cent of the eligible limit, within the cap of USD 100
million.
2. In order to facilitate large corporates
with proven track record and large import/export turnover to effectively and
actively manage currency risks arising out of genuine exposures, Reserve Bank
on application would consider permitting higher limits for booking forward contracts
on the basis of past performance without submission of documentary evidence.
Such forward contracts, booked under the enhanced limit, will be on a deliverable
basis.
3. Corporates desirous of availing of higher limits
may forward their applications, through an authorised dealer, to the Chief General
Manager, Reserve Bank of India, Exchange Control Department, Forex Markets Division,
Central Office, Mumbai-400 001 (Fax No. 22611427 justifying the need for the higher limits. Details of the import/export turnover
of the past three years, delayed realisations/payments during these years and
existing limits, duly authenticated by the authorised dealer, may also be furnished
in the enclosed format. |