RBI allows forward contract in all transactions

Tags: News
Providing operational flexibility in external sector, the Reserve Bank today allowed forward contracts in all current and capital account transactions up to one year.

"...It has been decided to allow, in case of contracted exposures, forward contracts in respect of all current account transactions as well as capital account transactions with a residual maturity of one year or less to be freely cancelled and rebooked," RBI said in a notification.

The decision, it said, has been taken in view of the evolving market conditions and with a view to providing operational flexibility in respect of current and capital account transactions.

As far as the exposure of the FIIs/QFIs/other portfolio investors is concerned, forward contracts booked by these investors, once cancelled, can be rebooked up to the extent of 10 per cent of the value of the contracts cancelled, it said.

The forward contracts booked by these investors may, however, be rolled over on or before maturity, it said.

As per the existing guidelines, exporters are allowed to cancel and rebook forward contracts to the extent of 50 per cent of the contracts booked in a financial year for hedging their contracted export exposures.

At the same time, importers are allowed to cancel and rebook forward contracts to the extent of 25 per cent of the contracts booked in a financial year for hedging their contracted import exposures.

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