1. Purpose To provide greater flexibility for hedging the currency risk arising out of current account transactions of Indian subsidiaries of Multi-National Companies (MNCs) by the parent or any non-resident group entity. 2. Users Non-resident parent or its centralised treasury or any other related entity hedging on behalf of the Indian subsidiary. 3. Products All FCY-INR derivatives, OTC as well exchange traded that the Indian subsidiary is eligible to undertake. 4. Operational Guidelines, Terms and Conditions for hedging -
The non-resident entity should be incorporated in a country that is member of the Financial Action Task Force (FATF) or member of a FATF-Style Regional body. -
The non-resident entity may approach an AD Cat-I bank which handles the foreign exchange transactions of its subsidiary for hedging the currency risk of and on the latter’s behalf. -
The non-resident may approach the AD Cat-I bank either directly or through its banker overseas. -
The Indian subsidiary shall be responsible for compliance with the rules, regulations and directions issued under FEMA 1999 and any other laws/rules/regulations applicable to these transactions in India. -
The transactions under this facility will be covered under a multiple party agreement involving the Indian subsidiary, the non-resident entity and the Indian AD Cat – I bank. -
The profit/ loss of the hedge transactions shall be reflected in the books of accounts of the Indian subsidiary. This requirement shall be included in the multiple party agreement. -
Any rupee account if required for undertaking the hedging transactions be permitted to be opened by the AD Bank in the name of the related non-resident entity. -
The concerned AD Bank shall be responsible for monitoring all hedge transactions (OTC as well as exchange traded) booked by the non-resident entity and ensuring that the Indian subsidiary has the necessary underlying exposure for the hedge transactions. -
Transactions booked on the exchanges may be reported to the concerned AD Bank for monitoring underlying exposure. -
AD banks shall report hedge contracts booked under this facility by the non-resident related entity to CCIL’s trade repository with a special identification tag. |