Master Direction – Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022.

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....r Direction - Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022. (ii) These Directions shall come into force on December 12, 2022. 2. Definitions (i) Hedging - The activity of undertaking a derivative transaction to reduce an identifiable and measurable risk. For the purpose of these directions, the relevant risks are commodity price risk and freight risk. (ii) Eligible entities - Eligible entities refers to residents other than Individuals. (iii) Direct Exposure to Commodity Price Risk - An eligible entity will be said to have direct exposure to commodity price risk if (a) It purchases/sells a commodity (in India or abroad) whose price is fixed by ref....

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....to the following: (i) Generic Products (a) Futures and forwards (b) Vanilla options (call option and put option) (c) Swaps (ii) Structured Products (a) Products which are combination of either cash instrument and one or more generic products (b) Products which are combination of two or more generic products 5. Hedging of commodity price risk (i) Eligible entities having exposure to commodity price risk for any eligible commodity may hedge such exposure in overseas markets using any of the permitted products. (ii) Eligible entities having exposure to price risk of gold may hedge such exposure only on exchanges in the International Financial Services Centre (IFSC) recogni....

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.... For this purpose, a list of acceptable jurisdictions shall be specified by FEDAI. (iii) Structured products may be permitted to eligible entities who are (a) listed on recognized domestic stock exchanges or (b) fully owned subsidiaries of such entities or (c) unlisted entities whose net worth is higher than INR 200 crore, subject to the condition that such product are used for the purpose of hedging as defined under these directions. (iv) All payments/receipts related to hedging of exposure to commodity price risk and freight risk shall be routed through a special account with the bank for this purpose. (v) Banks shall keep on their records full details of all hedge transactions and related remittances made by the entity. (vi) ....

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....ort to the Chief General Manager, Financial Markets Regulation Department, Reserve Bank of India through Extensible Business Reporting Language (XBRL) accessible at https://xbrl.rbi.org.in/orfsxbrl/ in the format provided in Annexure I. In case of no transactions, a "Nil" report shall be submitted by the bank. 11. Repeal The following circulars issued by the Reserve Bank stand repealed as on the date on which these Directions come into force: (i) A. P. (DIR Series) Circular No. 19 dated March 12, 2018 on Hedging of Commodity Price Risk and Freight Risk in Overseas Markets. (ii) A. P. (DIR Series) Circular No. 16 dated January 15, 2020 on Hedging of Commodity Price Risk and Freight Risk in Overseas Markets - Amendment....