TaxTMI 
TaxTMI 
Risk Management and Inter-bank Dealings – Hedging of foreign exchange risk
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....tand withdrawn from the date that these directions come into effect. 3. Necessary amendments (Notification No.FEMA.398/RB-2020 dated February 18, 2020) to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No.FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide Gazette Id no. CG-MH-E-06032020-216549 dated March 3, 2020, a copy of which is annexed to this circular. These regulations have been issued under clause (h) of sub-Section (2) of Section 47 of FEMA, 1999 (42 of 1999). 4. The directions shall come into effect from June 1, 2020 and replace the existing directions in Part A - Section I and II and Part D of the Master Direction on Risk Management and Interbank Dealings dated July 5, 2016, as amended from time to time. 5. The following reports prescribed in Part E of the Master Directions on Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended from time to time, shall stand withdrawn from the date that these directions come into effect. • Cross Currency Derivative Transactions (Half yearly) - Annex IV • Report on Booking of Forward Con....
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.... asset underlying the option. • 'SEBI' shall mean the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992 (15 of 1992). • 'IRDAI' shall mean the Insurance Regulatory and Development Authority of India established under the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999). • 'PFRDA' shall mean the Pension Fund Regulatory and Development Authority established under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013). • Net worth shall have the same meaning as defined in Section 2(57) of the Companies Act, 2013 (as amended). • Non-deliverable derivative contract (NDDC) means a foreign exchange derivative contract involving the Rupee, entered into with a person resident outside India and which is settled without involving delivery of the Rupee. • Exchanges shall mean 'recognised stock exchange' (excluding stock exchanges set up in International Financial Services Centres (IFSCs)) and shall have the meaning assigned in section 2(f) of the Securities Contracts (Regulations) Act, 1956. ....
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.... absence of cash flow is on account of factors which are beyond the control of the user. Such instances along with specific justification, shall be kept on record by the Authorised Dealer. v. All derivative contracts shall be subject to the Suitability and Appropriateness policy prescribed vide circular no.DBOD.No.BP.BC.86/21.04.157/2006-07 dated April 20, 2007 on Comprehensive Guidelines on Derivatives (as amended from time to time). vi. Authorised Dealers specifically designated by a user for the purpose of monitoring of transaction on exchanges shall ensure that all positions of the user in all contracts involving INR on all the exchanges put together, is backed by a contracted exposure to INR. vii. Authorised Dealers may call for such documents from the eligible users as they deem necessary for complying with the requirements of these directions. viii. Authorised Dealers, unless permitted by Reserve Bank to run books in contracts not involving INR, shall offer such contracts on a fully covered back-to-back basis. ix. Existing contracts booked under the provisions of the earlier direction may be continued till the date of their expiry. x. Banks in India having ....
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....r/Custodian. • For users referred to in the previous para, the exchanges shall provide information on day-end open positions as well as intra-day highest position of the user to the designated Authorised Dealer/Custodian. • The onus of complying with the directions shall rest with the user. In case of any contravention, the user shall render itself liable to any action under the Foreign Exchange Management Act (FEMA), 1999. Annex - II User Classification Framework 1. User Classification i. For the purpose of offering derivative contracts to a user, the Authorised Dealer shall classify the user either as a retail user or as a non-retail user. ii. The following users shall be eligible to be classified as non-retail users: • All entities regulated by a financial sector regulator subject to general or special permission of the concerned regulator • Exim Bank, National Bank of Agriculture and Rural Development (NABARD), National Housing Bank (NHB) and Small Industries Development Bank of India (SIDBI) • Companies with a minimum net worth of Rs. 500 crores • Persons resident outside Ind....
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...., 2000), namely: 1. Short title & commencement i. These Regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) (First Amendment) Regulations, 2020. ii. These regulations shall come into force from the date of their publication in the Official Gazette. 2. Amendments i. In para 2 (Definitions) of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000) the text of the definition of "authorised dealer" at sub para (ii) shall be substituted by the following: 'authorised dealer' means a person authorised as such by Reserve Bank under sub-section (1) of section 10 of the Act; ii. In para 2 (Definitions) of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000) the existing definition of 'Foreign exchange derivative contract' at sub para (v) shall be substituted by the following: "Foreign exchange derivative contract" means a financial contract which derives its val....
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....g text shall be replaced with the following: "Permission to enter into a foreign exchange derivative contract - A person, whether resident in India or resident outside India, may enter into a foreign exchange derivative contract or exchange traded currency derivative contract in accordance with provisions contained in Schedule I of this regulation. vi. The existing paras 5, 5A, 5B and 5C of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000) shall stand deleted. vii. In sub-para (c) of para 7(Remittance related to a Foreign exchange derivative contract), the reference to Regulation 5 shall stand replaced by Regulation 4. viii. Schedule I of the of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000) shall be renamed as "Permissible foreign exchange derivative contract" ix. The existing text under Schedule I of the Foreign Exchange Management (Foreign Exchange Derivative Contra....