Providing operational flexibility in external sector, the Reserve Bank of India (RBI) today allowed forward contracts in all current and capital account transactions up to one year.
"...it has been decided to allow, in case of contracted exposures, forward contracts in respect of all current account transactions as well as capital account transactions with a residual maturity of one year or less to be freely cancelled and rebooked," RBI said in a notification.
The decision, it said, has been taken in view of the evolving market conditions and with a view to providing operational flexibility in respect of current and capital account transactions.
As far as the exposure of the FIIs/QFIs/other portfolio investors is concerned, forward contracts booked by these investors, once cancelled, can be rebooked up to the extent of 10 per cent of the value of the contracts cancelled, it said.
The forward contracts booked by these investors may, however, be rolled over on or before maturity, it said.
As per the existing guidelines, exporters are allowed to cancel and rebook forward contracts to the extent of 50 per cent of the contracts booked in a financial year for hedging their contracted export exposures.
At the same time, importers are allowed to cancel and rebook forward contracts to the extent of 25 per cent of the contracts booked in a financial year for hedging their contracted import exposures.
Indian central bank eases hedging rules for currency trading
(Reuters) - India's central bank said on Monday it had eased rules for hedging foreign exchange exposures, allowing greater flexibility for cancelling and rebooking forward contracts.
The Reserve Bank of India is now allowing domestically-held forward contracts for all current as well as capital account transactions with a residual maturity of one year or less to be freely cancelled and taken out again, called rebooking.
Foreign investors will be allowed to rebook 10 percent of the value of cancelled contracts, up from nothing previously.
Before the changes domestic exporters could cancel and rebook up to 50 percent of the contracts booked in a financial year for hedging their contracted export exposures. Importers were are allowed to cancel and rebook up to 25 percent of contracts booked in a financial year.
These limits have been dropped.
The RBI had issued several strictures on rupee trading after the Indian currency started slumping since late May on fears that the U.S. federal reserve will begin tapering its monetary stimulus.
The rupee plunged to a record low of 68.85 to the dollar in late August but has recovered after the central bank took steps to bolster forex reserves, including raising $34 billion through two concessional swap facilities.