The Reserve Bank of India today released a draft of the revised directions and regulations on facilities for hedging foreign exchange risk by Residents and Non-residents. Comments on the draft directions are invited from banks, market participants and other interested parties by March 15, 2019.

Feedback on the draft directions may be forwarded to:

The Chief General Manager, Reserve Bank of India
Financial Markets Regulation Department
1st Floor, Main Building
Shahid Bhagat Singh Marg
Mumbai – 400001

Or by email with subject line “Feedback - facilities for hedging foreign exchange risk”

Background

A review of the existing facilities for hedging of foreign exchange risk by non-residents and residents was announced in the Statement on Developmental and Regulatory Policies in February 2018 and August 2018 respectively.

Post review, a draft of the revised directions is being put in the public domain for seeking comments. The draft directions propose to, inter alia:

(i) Merge the facilities for residents and non-residents into a single unified facility for all users,

(ii) Allow users having valid exposure to hedge the same using any available instrument,

(iii) Introduce the facility to hedge anticipated exposure,

(iv) Simplify the procedures for authorised dealers to offer foreign exchange derivatives.

Once finalised, the directions shall replace the existing directions in Part A - Section I and II of the Master Direction on Risk Management and Interbank Dealings.

Ajit Prasad
Assistant Adviser

Unified hedging facility for foreign exchange exposure allows residents and non residents to hedge valid and anticipated exposures. The Reserve Bank's draft directions merge resident and non resident hedging regimes into a single unified facility, allow users with valid exposure to hedge using any available instrument, introduce a facility to hedge anticipated exposure, and simplify procedures for authorised dealers offering foreign exchange derivatives; the draft is open for public consultation and will replace Parts A, Sections I and II of the Master Direction on Risk Management and Interbank Dealings when finalised.