TaxTMI 
TaxTMI 
Risk Management and Inter-Bank Dealings - Commodity Hedging
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....000 dated May 3, 2000, as amended from time to time and A.P. (DIR Series) Circular No.03 dated July 23, 2005. Currently, residents in India are permitted, with prior approval of the Reserve Bank, to enter into contracts in commodity exchanges or markets outside India to hedge the price risk in a commodity, subject to certain terms and conditions. Further, companies listed on a recognised stock exc....
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....nges. As announced in the Annual Policy Statement for the year 2007-08 (para 139), it has been decided that AD Category - I banks, which have specifically been authorised by Reserve Bank in this regard, may, henceforth, permit domestic producers / users to hedge their price risk on aluminium, copper, lead, nickel and zinc in international commodity exchanges, based on their underlying economic ....
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....OTC products as well since ATF or its close substitutes are not traded on the exchanges. According to the domestic users, the hedging of their exposures to price risk on ATF indirectly through the exchange traded products, such as crude oil, heating oil, etc., may not achieve perfect hedges. Accordingly, if the risk profile warrants, the actual users of ATF may also use OTC contracts. AD Category ....
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....6. AD Category - I banks that have already been authorised by Reserve bank to grant permission to companies listed on a recognised stock exchange to hedge commodity price risk should also apply afresh in respect of these new facilities. 7. AD Category - I banks which have been granted permission to approve commodity hedging are required to submit a monthly report to the Chief General Manager, R....