Risk Management and Inter-bank Dealings: Operational flexibility for Indian subsidiaries of Non-resident Companies - RBI - Reserve Bank of India
Risk Management and Inter-bank Dealings: Operational flexibility for Indian subsidiaries of Non-resident Companies
RBI/2016-17/254 March 21, 2017 To, Madam / Sir, Risk Management and Inter-bank Dealings: Operational flexibility for Indian subsidiaries of Non-resident Companies 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) issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (Act 42 of 1999), as amended from time to time and Master Direction on Risk Management and Inter-Bank Dealings dated July 5, 2016, as amended from time to time. 2. With a view to providing operational flexibility to multinational entities and their Indian subsidiaries exposed to currency risk arising out of current account transactions emanating in India, the extant hedging guidelines have been amended as per the terms and conditions in the Annex I to this circular. An announcement to this effect was made in the Statement on Developmental and Regulatory Policies of Reserve Bank of India dated October 4th, 2016 (para. 9). 3. Necessary amendments (Notification No.FEMA No.384/2017-RB dated March 17, 2017) to Foreign Exchange Management (Foreign Exchange Derivatives Contracts) Regulations, 2000 (Notification No. FEMA.25/RB-2000 dated May 3, 2000) (Regulations) have been notified in the Official Gazette vide G.S.R.No.260 (E) dated March 17, 2017 a copy of which is given in the Annex II to this circular. These regulations have been issued under clause (h) of sub-section (2) of Section 47 of FEMA, 1999 (42 of 1999). 4. AD Cat-I banks may bring the contents of this circular to the notice of their constituents and customers. 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 (T Rabi Sankar) [Annex I to A.P. (DIR Series) Circular No. 41 dated March 21, 2017] Operational flexibility for Indian subsidiaries of Non-resident Companies 1. Purpose To provide operational flexibility for booking derivative contracts to hedge the currency risk arising out of current account transactions of Indian subsidiaries of Multi-National Companies (MNCs). 2. Users Non-resident parent of an Indian subsidiary or its centralised treasury or its regional treasury outside India. 3. Products All FCY-INR derivatives, OTC as well exchange traded that the Indian subsidiary is eligible to undertake as per FEMA, 1999 and Regulations and Directions issued thereunder. 4. Operational Guidelines, Terms and Conditions for hedging
[Annex II to A.P. (DIR Series) Circular No. 41 dated March 21, 2017] RESERVE BANK OF INDIA Notification No.FEMA.384/RB-2017 March 17, 2017 Foreign Exchange Management (Foreign Exchange Derivative Contracts) In exercise of the powers conferred by clause (h) of sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank hereby makes the following amendments in the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), namely:- 1. Short Title and Commencement (i) These regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2017. (ii) They shall come in to force from the date of their publication in the Official Gazette. 2. Amendment under Schedule II: In the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No. FEMA 25/RB-2000 dated May 3, 2000), in Schedule II, after the existing para 6, the following shall be added, namely: A non-resident may enter into a foreign exchange derivative contract with an Authorised Dealer bank in India to hedge an exposure to exchange risk of and on behalf of its Indian subsidiary in respect of the said subsidiary’s transactions subject to such terms and conditions as may be stipulated by the Reserve Bank from time to time. (T Rabi Sankar) Footnote:- GSR No. 756(E) dt. 28.09.2000, Published in the Official Gazette of Government of India – Extraordinary – Part-II, Section 3, Sub-Section (i) dated March 17, 2017- G.S.R.No. 260 (E). |