RBI/2006-2007/439
A. P. (DIR Series)
Circular No. 76 June 19, 2007 To,
All Category - I Authorised Dealer
Banks Madam / Sir, Hedging
of Overseas Direct Investments By Residents - Liberalisation Attention
of Authorised Dealer Category - I (AD Category - I) banks is invited to A.
P. (DIR Series) Circular No. 47 dated December 12, 2003, in terms of which
resident entities having overseas direct investments (in equity and loan) are
permitted to hedge the exchange risk arising out of such investments by entering
into forward / option contracts with AD Category – I banks, subject to verification
of such exposure. Such contracts must be completed by delivery or rolled over
on the due date and not cancelled. 2. As
announced in the Annual
Policy Statement for the Year 2007-08 (para 141), with a view to provide greater
flexibility to residents with overseas direct investments (in equity and loan),
it has been decided to allow cancellation of such forward contracts. Accordingly,
AD Category – I banks may allow cancellation of forward contracts entered into
by residents for overseas direct investments (in equity and loan) for hedging
the exchange risk. Further, 50 per cent of the cancelled contracts may be allowed
to be rebooked. All other conditions and guidelines contained in A. P. (DIR Series)
Circular No. 47 dated December 12, 2003 remain unchanged. 3. Necessary
amendments to Notification
No.FEMA25/RB-2000 dated 3rd May 2000, [Foreign Exchange Management
(Foreign Exchange Derivative Contracts) Regulations, 2000] are being notified
separately. 4. AD Category – I
banks may bring the contents of this circular to the notice of their constituents
and customers concerned. 5. The
directions contained in this circular have 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 |