RBI/2012-13/258
A.P. (DIR Series) Circular No.45
October 22, 2012
To,
All Authorised Dealer Category – I Banks
Madam / Sir,
Facilities for Persons Resident outside India – FIIs
Attention of Authorised DealersCategory – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA/25/RB-2000] and A.P. (DIR Series) Circular No.32 dated December 28, 2010, as amended from time to time.
2. As per the extant guidelines, only designated branches of AD Category I banks maintaining accounts of FIIs are allowed to act as market makers to FIIs for hedging their currency risk on the market value of entire investment in equity and/or debt in India as on a particular date.
3. It has now been decided to allow FIIs to approach any AD Category I bank for hedging theircurrency risk on the market value of entire investment in equity and/or debt in India as on a particular date subject to the following conditions:
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
Yours faithfully,
(RudraNarayanKar)
Chief General Manager
A.P. (DIR Series) Circular No.45
October 22, 2012
To,
All Authorised Dealer Category – I Banks
Madam / Sir,
Facilities for Persons Resident outside India – FIIs
Attention of Authorised DealersCategory – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA/25/RB-2000] and A.P. (DIR Series) Circular No.32 dated December 28, 2010, as amended from time to time.
2. As per the extant guidelines, only designated branches of AD Category I banks maintaining accounts of FIIs are allowed to act as market makers to FIIs for hedging their currency risk on the market value of entire investment in equity and/or debt in India as on a particular date.
3. It has now been decided to allow FIIs to approach any AD Category I bank for hedging theircurrency risk on the market value of entire investment in equity and/or debt in India as on a particular date subject to the following conditions:
- The eligibility for cover may be determined on the basis of a valuation certificate provided by the designated AD category bank along with a declaration by the FII to the effect that its global outstanding hedges plus the derivatives contracts cancelled across all AD category banks is within the market value of its investments.
- The FII should also provide a quarterly declaration to the custodian bank that the total amount of derivatives contract booked across AD Category banks are within the market value of its investments.
- The hedges taken with AD banks other than designated AD banks, have to be settled through the Special Non-Resident Rupee A/c maintained with the designated bank through RTGS/NEFT.
5. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
Yours faithfully,
(RudraNarayanKar)
Chief General Manager
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