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Hedging tools expanded

Special Correspondent

MUMBAI: The Reserve Bank of India (RBI) expanded the range of hedging tools available to the market participants as also facilitate `dynamic' hedging by the residents. Authorised dealer Category-I banks would be allowed to permit domestic producers and users to hedge their price risk on aluminium, copper, lead, nickel and zinc in international commodity exchanges, based on their underlying economic exposures and to permit actual users of aviation turbine fuel (ATF) to hedge their economic exposures in the international commodity exchanges based on their domestic purchases.

Besides enhancing the limit for forward contracts on non-deliverable basis by exporters and importers to 75 per cent from 50 per cent, the RBI decided to allow resident individuals to book forward contracts without production of underlying documents up to $100,000 per year and these can be freely cancelled and rebooked. Forward contracts entered into by residents for hedging overseas direct investments would be allowed to be cancelled and rebooked. SMEs would be permitted to book (and also cancel/rebook) forward contracts without underlying exposures or past records of exports and imports through authorised dealers with whom the SMEs have credit facilities. A Working Group is to be set up on Currency Futures.

ADs are allowed remittances on account of requests from Business Process Outsourcing (BPO) companies towards payment of the cost of equipment to be installed at overseas sites in connection with setting up of International Call Centres.

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