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of <h1>RBI Circular: Indian Subsidiaries of Multinationals Can Hedge Currency Risks via Derivatives with Non-Resident Parents.</h1> The Reserve Bank of India issued a circular providing operational flexibility for Indian subsidiaries of multinational companies exposed to currency risks from current account transactions. Amendments to the Foreign Exchange Management Regulations allow non-resident parents or their centralized treasuries to hedge currency risks through derivative contracts. These transactions require a tri-partite agreement between the Indian subsidiary, its non-resident parent, and an authorized dealer bank. The non-resident entity must be from a Financial Action Task Force member country. Compliance with FEMA and other applicable laws is mandatory, and hedge transactions must be reported to the trade repository with a special identification tag.
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