Permitting writing of options against contracted exposures by Indian Residents

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Series) circular no. 32 dated December 28, 2010 - Comprehensive Guidelines on Over the Counter (OTC) Foreign Exchange Derivatives and Overseas Hedging of Commodity Price and Freight Risks, as amended from time to time. Attention is also invited to Reserve Bank circular No. DBOD.No.BP.BC. 86/21.04.157/2006-07 dated April 20, 2007 on Comprehensive Guidelines on Derivatives as well as the modifications issued through circular No. DBOD.No.BP.BC. 44/21.04.157/2011-12 dated November 2, 2011. 2. As announced in the Bi-Monthly Monetary Policy Statement on April 7, 2015, in order to encourage participation in the Over the Counter (OTC) currency options market and improve its liquidity, it has been decided to permit resident exporters and importer....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....rency and foreign currency-Indian Rupee options books. b.    Users: Listed companies and their subsidiaries/joint ventures/associates having common treasury and consolidated balance sheet or unlisted companies with a minimum net worth of Rs. 200 crore provided appropriate disclosures are made in the financial statements as prescribed by the Institute of Chartered Accountants of India (ICAI). 2. Product a.    Covered Call: A resident exporter may write (sell) a standalone plain vanilla European call option contract to an AD Category-I bank in India against the cover of contracted exposure arising out of exports of goods and services from India. b.    Covered Put: A re....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....y of assessing the strength of risk management systems, financial soundness of the option writer shall rest with the concerned AD Cat-I bank. AD Category I banks may stipulate safeguards, such as, continuous profitability, higher net worth, turnover, etc. depending on the scale of forex operations and risk profile of the option writers. d.    Covered options may be written against either a portion or the full value of the underlying. e.    AD Cat-I banks shall treat the exposures against which a covered option has been written as an "unhedged exposure". Accordingly, the guidelines issued vide Reserve Bank Circular DBOD.No.BP.BC. 85/21.06.200/2013-14 dated January 15, 2014 on Capital and Provis....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....sp; AD Cat-I banks entering into covered options with their constituents may report the same to CCIL's reporting platform for OTC foreign exchange derivatives in terms of our circular FMD.MSRG.No.75/02.05.002/2012-13 dated March 13, 2013, as amended from time to time. 4. In addition to the above, "General Instructions for OTC forex derivative contracts entered by Residents in India," as laid down under Section (I)(B) of the A.P. (DIR Series) No. 32 dated December 28, 2010, as amended from time to time, shall be applicable, mutatis mutandis, to covered options. Annex II to A.P. (DIR Series) Circular No. 78 dated June 23, 2016 Notification No. FEMA.365/2016-RB June 1, 2016 Foreign Exchange Management (Foreign Exchange Derivativ....