SECTION I

Facilities for Persons Resident in India other than Authorised Dealers Category-I

Forward Contracts

A 1. A person resident in India may enter into a forward contract with an Authorised Dealer Category-I (AD) bank in India to hedge an exposure to exchange risk in respect of a transaction for which sale and/or purchase of foreign exchange is permitted under the Act, or rules or regulations or directions or orders made or issued thereunder, subject to the following terms and conditions:

a) the AD bank through verification of documentary evidence is satisfied about the genuineness of the underlying exposure, irrespective of the transaction being a current or a capital account transaction. Full particulars of contract should be marked on such documents under proper authentication and copies thereof retained for verification. However, AD bank may allow importers and exporters to book forward contracts on the basis of a declaration of exposure subject to the conditions mentioned in paragraph A 2 of this circular;

b) the maturity of the hedge does not exceed the maturity of the underlying transaction;

c) the currency of hedge and tenor are left to the choice of the customer;

d) where the exact amount of the underlying transaction is not ascertainable, the contract is booked on the basis of a reasonable estimate;

e) foreign currency loans/bonds will be eligible for hedge only after final approval is accorded by the Reserve Bank where such approval is necessary or loan identification number is given by the Reserve Bank;

f) Global Depository Receipts (GDRs) will be eligible for hedge after the issue price has been finalized;

g) balances in the Exchange Earner's Foreign Currency (EEFC) accounts sold forward by the account holders shall remain earmarked for delivery and such contracts shall not be cancelled. They may, however, be rolled-over;

h) all forward contracts with rupee as one of the currencies, booked to cover foreign exchange exposures falling due within one year can be freely cancelled and rebooked. All forward contracts, involving the rupee as one of the currencies, booked by residents to hedge current account transactions, regardless of tenor, may be allowed to be cancelled and rebooked freely. This relaxation will not be applicable to forward contracts booked on past performance basis without documents as also forward contracts booked to hedge transactions denominated in foreign currency but settled in INR, where the current restrictions will continue.  The revised format in which corporate exposures are required to be reported is given in Annex-V. The details of exposures of all corporate clients have to be included in the report. Further, the facility of cancellation and rebooking should not be permitted unless the corporate has submitted the required exposure information as on April 1 of the year. All non- INR forward contracts can be freely re-booked on cancellation.

i) substitution of contracts for hedging trade transactions may be permitted by an authorised dealer on being satisfied with the circumstances under which such substitution has become necessary.

A 2. AD banks may also allow importers and exporters to book forward contracts on the basis of a declaration of an exposure and based on past performance upto the average of the previous three financial years’ (April to March) actual import/export turnover or the previous year’s actual import/export turnover, whichever is higher, subject to the following conditions:

a) The forward contracts booked in the aggregate during the year and outstanding at any point of time should not exceed the eligible limit i.e the average of the previous three financial years’ (April to March) actual import/export turnover or the previous year’s actual import/export turnover, whichever is higher. Contracts booked in excess of 75 per cent of the eligible limit will be on deliverable basis and cannot be cancelled. These limits shall be computed separately for import/export transactions.

b) Any forward contract booked without producing documentary evidence will be marked off against this limit.

c) Importers and exporters should furnish a declaration to the AD banks regarding amounts booked with other authorised dealers category-I under this facility.

d) An undertaking may be taken from the customer to produce supporting documentary evidence at the time of cancellation / before the maturity of the forward contract.

e) Outstanding forward contracts higher than 50 per cent of the eligible limit may be permitted by the AD bank on being satisfied about the genuine requirements of their constituents after examination of the following documents:

•  A certificate from the Chartered Accountant of the customer that all guidelines have been adhered to while utilizing this facility.
•  A certificate of import/export turnover of the customer during the past three years duly certified by their Chartered Accountant/bank in the format given in Annex-VI.

f) In the case of an exporter, the amount of overdue bills should not be in excess of 10 per cent of the turnover, to avail the above facility.

g) AD banks are required to submit a monthly report (as on the last Friday of every month) on the limits granted and utilized by their constituents under this facility in the format given in Annex-IX. The report may be forwarded to The Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai-400 001.

h) NOTE: Limits specified in paragraph A.2 pertain to forward contracts booked on the basis of declaration of an exposure. When forward contracts are booked by the AD bank after verification of documentary evidence, these limits are not applicable and such contracts may be booked up to the extent of the underlying.

A 3. A forward contract cancelled with one AD bank can be rebooked with another AD bank subject to the following conditions:
i) the switch is warranted by competitive rates on offer, termination of banking relationship with the AD bank with whom the contract was originally booked, etc;
ii) the cancellation and rebooking are done simultaneously on the maturity date of the contract;
iii) the responsibility of ensuring that the original contract has been  cancelled rests with the AD bank who undertakes rebooking of the contract.

A 4. a) Residents having overseas direct investments (in equity and loan) are permitted to hedge the exchange risk arising out of such investments. AD banks may enter into forward contracts with residents for hedging such investments subject to verification of exposure. Contracts covering overseas direct investments can be cancelled or rolled over on the due dates. However, AD banks may permit rebooking only to the extent of 50% of the cancelled contracts.
b) If a hedge becomes naked in part or full owing to shrinking of the market value of the overseas direct investment, the hedge may continue to the original maturity. Roll over on due date shall be permitted up to the extent of the market value as on that date.

A 5. AD banks may also enter into forward contracts with residents in respect of transactions denominated in foreign currency but settled in Indian Rupees including hedging the economic (currency indexed) exposure of importers in respect of customs duty payable on imports. These contracts shall be held till maturity and cash settlement would be made on the maturity date by cancellation of the contracts. Forward contracts covering such transactions once cancelled, are not eligible to be rebooked. However, in the event of change in the rate of customs duties due to government notifications, importers may be allowed to cancel and / or rebook the forward contracts before maturity.

Contracts other than Forward Contracts

A 6. a) A person resident in India who has borrowed foreign exchange in accordance with the provisions of Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000 , may enter into an Interest Rate Swap or Currency Swap or Coupon Swap or Foreign Currency Option or Interest Rate Cap or Collar (purchases) or Forward Rate Agreement (FRA) contract with an AD bank in India or with a branch outside India of a bank  authorized to deal in foreign exchange in India or with an Off-shore Banking Unit in India for hedging his loan exposure and unwinding from such hedges, provided that :
i) the contract does not involve the rupee.
ii) final approval has been accorded or loan identification number issued by the Reserve Bank for borrowing in foreign currency.
iii) the notional principal amount of the hedge does not exceed the outstanding amount of the foreign currency loan.
iv) the maturity of the hedge does not exceed the unexpired maturity of the underlying loan.
These contracts may be freely cancelled and rebooked.

b) A person resident in India, who has a foreign exchange or rupee liability, may enter into a contract for Foreign Currency-Rupee Swap with an AD bank in India to hedge long term exposure under the following terms and conditions:
 i) No swap transactions involving upfront payment of rupees or its equivalent in any form shall be undertaken.
ii) Swap transactions may be undertaken by AD banks as intermediaries by matching the requirements of corporate counter-parties.
iii) While no limits are placed on the AD banks for undertaking swaps to facilitate customers to hedge their foreign exchange exposures, limits have been put in place for swap transactions facilitating customers to assume a foreign exchange liability, thereby resulting in supply in the market. While matched transactions may be undertaken, a limit of USD 50 million is placed for net supply in the market on account of these swaps. Positions arising out of cancellation of foreign currency to rupee swaps by customers need not be reckoned within the cap.
iv) With reference to the specified limits for swap transactions facilitating customers to assume a foreign exchange liability, the limit will be reinstated on account of cancellation/ maturity of the swap and on amortization, up to the amounts amortized.
v) The above transactions if cancelled, shall not be rebooked or re-entered, by whatever name called.

c)  AD banks may enter into Foreign Currency-Rupee Option contracts with their customers on back-to-back basis. They are also permitted to run an options book subject to prior approval from the Reserve Bank. All guidelines applicable for forward contracts are applicable on rupee option contracts also. Detailed guidelines and reporting requirements are given in Annex-VII.

d) (i) A person resident in India may enter into a cross currency option contract (not involving the rupee) with an AD bank in India to hedge foreign exchange exposure arising out of his trade :

• Provided that in respect of cost-effective risk reduction strategies like range forwards, ratio-range forwards or any other variable by whatever name called, there shall not be any net inflow of premium. These transactions may be freely booked and/or cancelled.

ii) Cross currency options should be written on a fully covered back-to-back basis. The cover transaction may be undertaken with a bank outside India, an off-shore banking unit situated in a Special Economic Zone or an internationally recognized option exchange or another AD bank in India.

iii) All guidelines applicable for cross currency forward contracts are applicable to cross currency option contracts also.

iv) AD banks desirous of writing options, should obtain a one-time approval, before undertaking the business, from the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai, 400 001.

Explanation

The contingent foreign exchange exposure arising out of submission of a tender bid in foreign exchange is also eligible for hedging under this sub-paragraph.

NOTE:

In respect of foreign exchange derivative contracts both involving the rupee and not involving the rupee,

A. AD banks should ensure that in the case of

• such structures do not result in increase in risk in any manner and
• do not result in net receipt of premium by the customer
• it may be ensured that structured products do not contain any derivative, which is not allowed on a stand alone basis.

B.   AD banks should not offer leveraged swap structures.

C. AD banks should not allow the swap route to become a surrogate for forward contracts for those who do not qualify for forward cover.

Risk Management Policy for Corporates

A 7.  AD banks should ensure that the Board of Directors of the corporate has drawn up a risk management policy, laid down clear guidelines for concluding the transactions and institutionalised the arrangements for a periodical review of operations and annual audit of transactions to verify compliance with the regulations. The periodical review reports and annual audit reports should be obtained from the concerned corporate by the authorised dealers.

Hedging of Commodity Price Risk in the International Commodity Exchanges/Markets

A 8. (i) Residents in India, engaged in import and export trade or as otherwise approved by Reserve Bank from time to time, may hedge the price risk of all commodities in the international commodity exchanges/markets. Commercial bank ADs, satisfying certain minimum norms, authorized by the Reserve Bank, may grant permission to companies listed on a recognized stock exchange to hedge the price risk in respect of any commodity (except gold, silver, petroleum and petroleum products other than Aviation Turbine Fuel) in the international commodity exchanges/ markets. Detailed guidelines and reporting requirements are given in Annex X.  Applications for commodity hedging of companies/ firms which are not covered by the delegated authority of Authorised Dealers Category-I may be forwarded to Reserve Bank for consideration through the International Banking Division of an AD bank along with specific recommendation giving the following details:

1. A brief description of the hedging strategy proposed, namely:

• description of business activity and nature of risk,
• instruments proposed to be used for hedging,
• names of commodity exchanges and brokers through whom risk is proposed to be hedged and credit lines proposed to be availed. The name and address of the regulatory authority in the country concerned may also be given,
• size/average tenure of exposure and/or total turnover in a year, together with expected peak positions thereof and the basis of calculation.

2. A copy of the Risk Management Policy approved by the Management covering;

• risk identification
• risk measurements
• guidelines and procedures to be followed with respect to revaluation and/or monitoring of positions
• names and designations of officials authorised to undertake transactions and limits

3. Any other relevant information.
A one-time approval will be given by Reserve Bank along with the guidelines for undertaking this activity.

(ii)  AD Banks authorized by the Reserve Bank, may grant permission to companies listed on a recognized stock exchange to hedge the price risk in respect of domestic purchase  and sales of alminium, copper, lead, nickel and zinc  and in respect of domestic purchase of aviation turbine fuel (ATF) in the international commodity exchanges based on their underlying economic exposures. Detailed guidelines and reporting requirements are given in Annex XI.

Commodity Hedging by entities in Special Economic Zones

(iii)  AD banks may allow entities in the Special Economic Zones (SEZ) to undertake hedging transactions in the overseas commodity exchanges/markets to hedge their commodity prices on export/import, subject to the condition that such contract is entered into on a stand-alone basis.

Note: The term ''stand alone'' means the unit in SEZ is completely isolated from financial contacts with its parent or subsidiary in the mainland or within the SEZs as far as its import/export transactions are concerned.

Facilities for Persons Resident Outside India

Facilities for Foreign Institutional Investors (FIIs)

A 9.  a) Designated branches of AD banks maintaining accounts of FIIs may provide forward cover with rupee as one of the currencies to such customers subject to the following conditions:

i) FIIs are allowed to hedge the market value of their entire investment in equity and/or debt in India as on a particular date. If a hedge becomes naked in part or full owing to shrinking of the portfolio, for reasons other than sale of securities, the hedge may be allowed to continue to the original maturity, if so desired;

ii) these forward contracts, once cancelled may be permitted to be  rebooked up to a limit of 2 per cent of the market value (as at the beginning of the financial year) of their investment in equity and / or debt in India, the limit being calculated on the basis of market value of the portfolio. These contracts may be rolled over on or before maturity. The monitoring of forward cover must be done on a fortnightly basis. The reporting format is given at Annex XII.

iii) the cost of hedge is met out of repatriable funds and /or inward remittance through normal banking channel;

iv) all outward remittances incidental to the hedge are net of applicable taxes.

b) The eligibility for cover may be determined on the basis of the declaration of the FII. A review may be undertaken on the basis of market price movements, fresh inflows, amounts repatriated and other relevant parameters to ensure that the forward cover outstanding is supported by an underlying exposure.

Facilities for Non-resident Indians (NRIs)

A 10. AD banks may enter into forward contracts with NRIs as per the following guidelines to hedge:

i) the amount of dividend due to him on shares held in an Indian company.

ii) the balances held in the Foreign Currency Non-Resident (FCNR) account or the Non-Resident External Rupee (NRE) account. Forward contract with the rupee as one of the legs may be booked against balances in both the accounts. With regard to balances in FCNR(B) accounts, cross currency (not involving the rupee) forward contracts may also be booked to convert the balances in one foreign currency to another foreign currency in which FCNR(B) deposits are permitted to be maintained.

iii) the amount of investment made under the portfolio scheme in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 or under notifications issued thereunder or is made in accordance with the provisions of the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 and in both cases subject to the terms and conditions specified in the proviso to paragraph A 9 above.

Facilities for Hedging Foreign Direct Investment in India

A 11. a) AD banks may enter into forward contracts with residents outside India to hedge the investments made in India since January 1,1993, subject to verification of the exposure in India.

b) Residents outside India having foreign direct investment in India are also permitted to enter into forward contracts with AD banks with rupee as one of the currencies to hedge the currency risk on dividend receivable by them on their investments in Indian companies.

c) Residents outside India may also enter into forward sale contracts with AD banks to hedge the currency risk arising out of their proposed foreign direct investment in India. Such contracts may be allowed to be booked only after ensuring that the overseas entities have completed all the necessary formalities and obtained necessary approvals (wherever applicable) for the investment. The tenor of the contracts should not exceed six months beyond which permission of the Reserve Bank would be required to continue with the contract. These contracts, if cancelled, shall not be eligible to be rebooked for the same inflows and exchange gains, if any, on cancellation shall not be passed on to the overseas investor.

NOTE : All foreign exchange derivative contracts permissible for a person resident outside India other than a FII once cancelled, are not eligible to be rebooked. FII s can rebook contracts as per para A 9. (a) (ii) above.

SECTION II

Facilities for Authorised Dealers Category-I

Management of Banks’ Assets-Liabilities

A.12. a) AD banks may use the following instruments to hedge their asset-liability portfolio :

Interest Rate Swaps, Currency Swaps, and Forward Rate Agreements.

AD banks may also purchase call or put options to hedge their cross currency proprietary trading positions.

b) The use of these instruments is subject to the following conditions:

(i) An appropriate policy in this regard is approved by their Top Management.
(ii) The value and maturity of the hedge should not exceed that of the underlying.
(iii) No ‘stand alone’ transactions can be initiated. If a hedge becomes naked in part or full owing to shrinking of the portfolio, it may be allowed to continue till the original maturity and should be marked to market at regular intervals.
(iv) The net cash flows arising out of these transactions are booked as income and expenditure and reckoned as exchange position wherever applicable.

Hedging of Gold Prices

A 13. a) Banks authorised by Reserve Bank to operate the Gold Deposit Scheme may use exchange-traded and over-the-counter hedging products available overseas to manage the price risk. However, while using products involving options, it may be ensured that there is no net receipt of premium, either direct or implied. Banks, which are allowed to enter into forward gold contracts in India in terms of the guidelines issued by the Department of Banking Operations and Development (including the positions arising out of inter-bank gold deals) are also allowed to cover their price risk by hedging abroad in the manner indicated above.

b) Authorised banks are permitted to enter into forward contracts with their constituents (exporters of gold products, jewellery manufacturers, trading houses, etc.) in respect of the underlying sale, purchase and loan transactions in gold with them, subject to the conditions specified by the Reserve Bank.

Hedging of Capital

A 14. a) Foreign banks may hedge the entire Tier I Capital held by them in Indian books subject to the following conditions:

i) the forward contract should be for tenors of one year or more and may be rolled over on maturity. Rebooking of cancelled hedge will require prior approval of Reserve Bank;

ii) the capital funds should be available in India to meet local regulatory and CRAR requirements .Therefore, foreign currency funds accruing out of hedging should not be parked in nostro accounts but should remain swapped with banks in India at all times.

b) Foreign banks are permitted to hedge their Tier II Capital in the form of Head Office borrowing as subordinated debt , by keeping it swapped into Indian rupees at all times in terms of our Department of Banking Operations and Development (DBOD )'s circular No..IBS.BC.65/23.10.015/2001-02 dated February 14, 2002.

PART   B

ACCOUNTS OF NON-RESIDENT BANKS

General

B 1. (i) Credit to the account of a non-resident bank is a permitted method of payment to non-residents and is, therefore, subject to the regulations applicable to transfers in foreign currency.
 
(ii) Debit to the account of a non-resident bank is in effect an inward remittance in foreign currency.

Rupee Accounts of Non-Resident Banks

B 2. Authorised Dealers may open/close rupee accounts (non-interest bearing) in the names of their overseas branches or correspondents without prior reference to the Reserve Bank. Opening of rupee accounts in the names of branches of Pakistani banks operating outside Pakistan requires specific approval of the Reserve Bank.

Funding of Accounts of Non-resident Banks

B 3. (i) Authorised Dealers Category-I may freely purchase foreign currency from their overseas correspondents/branches at on-going market rates to lay down funds in their accounts for meeting their bonafide needs in India.

(ii) Transactions in the accounts should be closely monitored to ensure that overseas banks do not take a speculative view on the rupee. Any such instances should be notified to the Reserve Bank. 
NOTE: Forward purchase or sale of foreign currencies against rupees for funding is prohibited. Offer of two-way quotes to non-resident banks is also prohibited. 

Transfers from other Accounts

B 4. Transfer of funds between the accounts of the same bank or different banks is freely permitted.

Conversion of Rupees into Foreign Currencies

B 5. Balances held in rupee accounts of non-resident banks may be freely converted into foreign currency. All such transactions should be recorded in Form A2 and the corresponding debit to the account should be in form A3 under the relevant Returns.

Responsibilities of Paying and Receiving Banks

B 6. In the case of credit to accounts the paying banker should ensure that all regulatory requirements are met and are correctly furnished in form A1/A2 as the case may be.

Refund of Rupee Remittances

B 7. Requests for cancellation or refund of inward remittances may be complied with without reference to Reserve Bank after satisfying themselves that the refunds are not being made in cover of transactions of compensatory nature.

Overdrafts / Loans to Overseas Branches/ Correspondents

B 8. (i) Authorised Dealers Category-I may permit their overseas branches/ correspondents temporary overdrawals not exceeding Rs.500 lakhs in aggregate, for meeting normal business requirements. This limit applies to the amount outstanding against all overseas branches and correspondents in the books of all the branches of the authorised dealer category-I in India. This facility should not be used to postpone funding of accounts. If overdrafts in excess of the above limit are not adjusted within five days a report should be submitted to the Central Office of the Reserve Bank, Foreign Exchange Department, Forex Markets Division, within 15 days from the close of the month, stating the reasons therefor. Such a report is not necessary if arrangements exist for value dating.
(ii) Authorised Dealers wishing to extend any other credit facility in excess of (i) above to overseas banks should seek prior approval from the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai.

Rupee Accounts of Exchange Houses

B 9. Opening of rupee accounts in the names of exchange houses for facilitating private remittances into India requires approval of the Reserve Bank. Remittances through exchange houses for financing trade transactions are permitted upto Rs.2,00,000 per transaction.

PART  C

INTER-BANK FOREIGN EXCHANGE DEALINGS

General

C 1. The Board of Directors of authorised dealers category-I should frame an appropriate policy and fix suitable limits for various Treasury functions.

Position and Gaps

C 2. The net overnight open exchange position (Annex-I) and the aggregate gap limits are required to be approved by the Reserve Bank.

Inter-bank Transactions

C 3. Subject to compliance with the provisions of paragraphs C.1 and C.2, authorised dealers category-I may freely undertake foreign exchange transactions as under:

a) With authorised dealers category-I in India:

(i) Buying/Selling/Swapping foreign currency against rupees or another foreign currency.

(ii) Placing/Accepting deposits and Borrowing/Lending in foreign currency.

b). With banks overseas and Off-shore Banking Units in Special Economic Zones

(i) Buying/Selling/Swapping foreign currency against another foreign currency to cover client transactions or for adjustment of own position,

(ii) Initiating trading positions in the overseas markets .

NOTE :
A. Funding of accounts of Non-resident banks - please refer to paragraph B.3.
B. Form A2 need not be completed for sales in the inter-bank market, but all such transactions shall be reported to Reserve Bank in R Returns.

Foreign Currency Accounts/ Investments in Overseas Markets

C 4. (i) Inflows into foreign currency accounts arise primarily from client-related transactions, swap deals, deposits, borrowings, etc. Authorised Dealers Category-I may maintain balances in foreign currencies up to the levels approved by the Top Management. They are free to manage the surplus in these accounts through overnight placement and investments with their overseas branches/correspondents subject to adherence to the gap limits approved by the Reserve Bank.

(ii) Authorised Dealers Category-I are free to undertake investments in overseas markets up to the limits approved by their Board of Directors. Such investments may be made in overseas money market instruments and/or debt instruments issued by a foreign state with a residual maturity of less than one year and rated at least as AA (-) by Standard & Poor / FITCH IBCA or Aa3 by Moody's. For the purpose of investments in debt instruments other than the money market instruments of any foreign state, bank's Board may lay down country ratings and country - wise limits separately wherever necessary.

NOTE: For the purpose of this clause, 'money market instrument' would include any debt instrument whose life to maturity does not exceed one year as on the date of purchase.

(iii) Authorised Dealers Category-I may also invest the undeployed FCNR (B) funds in overseas markets in long-term fixed income securities subject to the condition that the maturity of the securities invested in do not exceed the maturity of the underlying FCNR (B) deposits.

(iv) Foreign currency funds representing surpluses in the nostro accounts may be utilised for:

a) making loans to resident constituents for meeting their foreign exchange requirements or for the rupee working capital/capital expenditure needs subject to the prudential/interest-rate norms, credit discipline and credit monitoring guidelines in force.

b) extending credit facilities to Indian wholly owned subsidiaries/ joint ventures abroad in which at least 51 per cent equity is held by a resident company, subject to the guidelines issued by Reserve Bank (Department of Banking Operations & Development).

(v) Authorised Dealers may write-off/transfer to unclaimed balances account, unreconciled debit/credit entries as per instructions issued by Department of Banking Operations and Development, from time to time.

Loans/Overdrafts

C 5. a) All categories of overseas foreign currency borrowings of authorised dealers category-I, (except for borrowings at (c) below), including existing External Commercial Borrowings and loans/overdrafts from their Head Office, overseas branches and correspondents and overdrafts in nostro accounts (not adjusted within five days), shall not exceed 25 per cent of their unimpaired Tier I capital or USD 10 million (or its equivalent), whichever is higher. The aforesaid limit applies to the aggregate amount availed of by all the offices and branches in India from all their branches/correspondents abroad and also includes overseas borrowings in gold for funding domestic gold loans (cf. DBOD circular No. IBD.BC. 33/23.67.001/2005-06 dated September 5, 2005). If drawals in excess of the above limit are not adjusted within five days, a report, as per the format in Annex-VIII, should be submitted to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai 400001, within 15 days from the close of the month in which the limit was exceeded. Such a report is not necessary if arrangements exist for value dating.
b) The funds so raised may be used for purposes other than lending in foreign currency to constituents in India and repaid without reference to the Reserve Bank. As an exception to this rule, AD banks are permitted to use borrowed funds as also foreign currency funds received through swaps for granting foreign currency loans for export credit in terms of IECD Circular No 12/04.02.02/2002-03 dated January 31,2003. Any fresh borrowing above this limit shall be made only with the prior approval of the Reserve Bank. Applications for fresh ECBs should be made as per the current ECB Policy.
c) The following borrowings would continue to be outside the limit of 25 per cent of unimpaired Tier I capital or USD 10 million (or its equivalent), whichever is higher:
i). Overseas borrowings by authorised dealers category-I for the purpose of financing export credit subject to the conditions prescribed in IECD Master Circular dated July 1, 2003 on Export Credit in foreign currency.
ii). Subordinated debt placed by head offices of foreign banks with their branches in India as Tier II capital.
iii) Capital funds raised/augmented by the issue of Innovative Perpetual Debt Instruments and Debt Capital Instruments, in foreign currency, in terms of Circulars DBOD. No. BP.BC.57/21.01.002/2005-06 dated January 25, 2006 and DBOD. No. BP.BC.23/21.01.002/2006-07 dated July 21, 2006
iv) any other overseas borrowing with the specific approval of the Reserve Bank.
d) Interest on loans/overdrafts may be remitted (net of taxes) without the prior approval of Reserve Bank.

PART D

REPORTS TO THE RESERVE BANK

D i) The Head/Principal Office of each authorised dealer category-I should submit daily statements of Foreign Exchange Turnover in Form FTD and Gaps, Position and Cash Balances in Form GPB through the Online Returns Filing System (ORFS) as per format given in Annex-II.

ii) The Head/Principal Office of each authorised dealer category-I should forward a statement of Nostro / Vostro Account balances on a monthly basis in the format given in Annex-III to the Director, Division of International Finance, Department of Economic Analysis and Policy, Reserve Bank of India, Central Office Building, 8th Floor, Fort, Mumbai-400 001. The data may also be transmitted by fax or e-mail at the numbers/addresses given in the format.

iii) Authorised Dealers Category-I should consolidate the data on cross currency derivative transactions undertaken by residents in terms of Paragraph A 6 (b) and (d) and submit half-yearly reports (June and December) to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai-400 001 as per the format indicated in the Annex-IV.

iv) Authorised Dealers Category-I should forward details of exposures in foreign exchange as on 1st April every year as per the format indicated in Annex-V to the Chief General Manger, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai, 400 001. Please note that details of exposures of all corporate clients have to be included in the report.

v) Authorised Dealers Category-I have to report their total outstanding foreign currency borrowings under all categories as on the last Friday of every month to The Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai-400 001, as per the format in Annex-VIII. The report should be received by the 10th of the following month.

vi) Authorised Dealers Category-I are required to submit a monthly report (as on the last Friday of every month) on the limits granted and utilized by their constituents under the facility of booking forward contracts on past performance basis, as per the format in Annex-IX. The report may be forwarded to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai-400 001 and by e-mail to fedcofmd@rbi.org.in so as to reach the Department by the 10th of the following month.

vii) The Head/Principal Office of each authorised dealer category-I should submit a statement in form BAL giving details of their holdings of all foreign currencies on fortnightly basis through Online Returns Filing System (ORFS) within seven calendar days from the close of the reporting period to which it relates.

viii) A monthly statement should be furnished to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai-400 001, before the 10th of the succeeding month, in respect of cover taken by FIIs, indicating the name of the FII / fund, the eligible amount of cover, the actual cover taken, etc. as per the format in Annex XII.

ix)  The Head/Principal Office of each authorised dealer category-I should furnish an up-to-date list (in triplicate) of all its offices/branches, which are maintaining rupee accounts of non-resident banks as at the end of December every year giving their code numbers allotted by Reserve Bank. The list should be submitted before 15th January of the following year to the Central Office of the Reserve Bank, Foreign Exchange Department, Central Statistical Division, Mumbai 400 001. The offices/branches should be classified according to area of jurisdiction of Reserve Bank Offices within which they are situated.

Merchant

Inter bank

Spot, Cash, Ready, T.T. etc.

Forwards

Cancellation of Forwards

Spot

Swap

Forwards

FCY/INR

Purchase from

 Sales to

FCY/FCY

Purchase from

Sales to

:

IN USD MILLION

(Cash Balance + All Investments)

Net Open Exchange Position (Rs.)

:

O/B (+)/O/S (-) IN INR CRORE

Of the above FCY/INR

:

IN INR CRORE

AGL maintained (In USD mio)

:

VaR maintained(In INR):

 II months

 III months

 IV months

 V months

 VI months

VIImonths

Sr. No.

Currency

Net balance in
Nostro Account

Net balance in
Vostro Account.

1

USD

2

EUR

3

JPY

4

GBP

5

Rupee

6

Other currencies
(in US $ million)

Product

No. of transactions

Notional principal amount in USD

Interest rate swaps

Currency swaps

Coupon swaps

Foreign currency option

Interest rate caps or collars (Purchases)

Forward rate agreement

Any other product as permitted by Reserve Bank from time to time

Sr. No.

Name of the corporate

Import transactions

Non-trade payments

Amount in USD mio equivalent

Amounts already hedged(USD mio)

Amount in USD mio equivalent

Amounts already hedged (USD mio)

@

#

#

#

Turnover

Percentage of overdue bills to turnover

Existing limit for booking of forward cover based on past performance

Export

Import

Export

Import

Export

Import

2003-04

2004-05

2005-06

Sr. no

Trade
date

Client/
C-party
Name

Notional

Option
Call/
Put

Strike

Maturity

Premium

Purpose*

Currency Pair

Notional Outstanding

Net Portfolio Delta

Net Portfolio Gamma

Net Portfolio Vega

calls

puts

USD-INR

USD

USD

USD

EUR-INR

EUR

EUR

EUR

JPY-INR

JPY

JPY

JPY

Maturity Buckets

Strike Price

1 week

2 weeks

1 month

2 months

3 months

> 3 months

<45.00

45.00-45.25

45.26-45.50

45.51-45.75

45.76-46.00

46.01-46.25

46.26-46.50

46.51-46.75

46.76-47.00

47.01-47.25

47.26-47.50

47.51-47.75

47.76-48.00

>48.00

Unimpaired Tier-I capital as at the close of previous quarter.

Borrowings in terms of Para C.5 (a) of Master Circular on Risk Mgmt. and Inter-Bank Dealings dated July 1, 2006

Borrowings in excess of the above limit for replenishment. of rupee resources @

External Commercial Borrowings

Borrowings under following scheme as per IECD Master Circular on Export Credit in Foreign Currency dated July 1, 2003 & Regulation 4.2(iv) of Notification No. FEMA 3/2000-RB dated May 3, 2000

(a) Lines of Credit for extending Pre-Shipment Credit in Foreign Currency (PCFC)

(b) Bankers Acceptance Facility (BAF) / Loan from overseas for extending Redisctg. of Export Bills Abroad Scheme (EBR)

A

1

2

3

4a

4b

Subord. debt in foreign currency for inclusion in Tier-II capital

Any other category (please specify here in this cell )

Total of (1+2+3+6)

Total of (1+2+3+4+6)

Borrowings under categories (1+2+3+6) expressed as a percentage of Tier-I capital at A

Borrowings under categories (1+2+3+4+6) expressed as a percentage of Tier-I capital at A

5

6

7

8

9

10

Total Limits sanctioned during the month

Cumulative sanctioned limits

Amt of contracts booked

Amount utilized (by delivery of documents)

Amount of forward contracts cancelled

1

2

3

4

5

Eligibility for Forward cover

Forward Contracts Booked

Forward Contracts Cancelled

Total forward cover outstanding

During the month

Cumulative Total – Year to Date

During the month

Cumulative total – Year to date

Eligibility for Forward cover

Forward Contracts Booked

Forward Contracts Cancelled

Total forward cover outstanding

During the month

Cumulative Total – Year to Date

During the month

Cumulative total – Year to date

Sr. No.

Notification / Circular 

Date

1.

Notification No. FEMA 25/2000-RB

May 3, 2000

2.

Notification No. FEMA 101/2003-RB

October 3, 2003

3.

Notification No. FEMA 104/2003-RB

October 21, 2003

4.

Notification No. FEMA 105/2003-RB

October 21, 2003

5.

Notification No. FEMA 127/2005-RB

January 5, 2005

6.

Notification No. FEMA 143/ 2005-RB

December 19, 2005

7.

Notification No. FEMA 147/ 2006-RB

March 16, 2006

8.

Notification No. FEMA 148/ 2006-RB

March 16, 2006

1.

A.P (DIR Series) Circular No. 92

April 4, 2003

2.

A.P (DIR Series) Circular No. 93

April 5, 2003

3.

A.P (DIR Series) Circular No. 98

April 29, 2003

4.

A.P (DIR Series) Circular No. 108

June 21, 2003

5.

A.P.(DIR Series) Circular No. 28

October 17, 2003

6.

A.P.(DIR Series) Circular No. 46

December 9, 2003

7.

A.P.(DIR Series) Circular No. 47

December 12, 2003

8.

A.P.(DIR Series) Circular No. 81

March 24, 2004.

9.

A.P.(DIR Series) Circular No 26

November 1, 2004

10.

A.P.(DIR Series) Circular No 47

June 23, 2005

11.

A.P.(DIR Series) Circular No 03

July 23, 2005

12.

A.P.(DIR Series) Circular No 25

March 6, 2006

13.

EC.CO.FMD. No.8 /02.03.75/2002-03

February 4, 2003

14.

EC.CO.FMD. No.14 /02.03.75/2002-03

May 9, 2003

15.

EC.CO.FMD.No. 345/02.03.129(Policy)/2003-04

November 5, 2003

16.

FE.CO.FMD.1072/02.03.89/2004-05

February 8, 2005

17.

FE.CO.FMD. 2/02.03.129(Policy)/2005-06

November 7, 2005

18.

FE.CO.FMD 21921/02.03.75/2005-06

April 17, 2006

19

A.P.(DIR Series) Circular No.21

December 13, 2006

20

A.P.(DIR Series) Circular No.22

December 13, 2006

21

A.P.(DIR Series) Circular No.32

February 8, 2007

22

A.P.(DIR Series) Circular No.52

May 08, 2007

23

A.P.(DIR Series) Circular No.66

May 31, 2007

24

A.P.(DIR Series) Circular No.76

June 19,2007