Hedging of exchange rate risk by Foreign Portfolio Investors (FPIs) under Voluntary Retention Route

By | March 2, 2019
(Last Updated On: March 2, 2019)

Hedging of exchange rate risk by Foreign Portfolio Investors (FPIs) under Voluntary Retention Route

RBI/2018-19/136
A .P. (DIR Series) Circular No. 22

March 01, 2019

To
All Category – I Authorised Dealer banks

Madam / Sir,

Hedging of exchange rate risk by Foreign Portfolio Investors (FPIs) under Voluntary Retention Route

Attention of Authorised Dealers Category – 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 dated May 3, 2000), as amended from time to time and Master Direction – Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended from time to time.

2. A reference is also invited to A.P. (DIR Series) Circular No. 21 dated March 01, 2019 on Voluntary Retention Route (VRR) for Foreign Portfolio Investors (FPIs) investment in debt. The operational guidelines, terms and conditions for hedging the exposure to exchange rate risk on account of investments made under this route are provided in the Annex to this circular.

3. Necessary amendments (Notification No. FEMA 390/2019-RB dated February 26, 2019) to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) have been notified in the Official Gazette vide G.S.R. No. 161 (E) dated February 26, 2019. These are issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (42 of 1999).

4. The directions contained in this circular are 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,

(T Rabi Sankar)
Chief General Manager

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