MANU/RPRL/0217/2024
Ministry : Reserve Bank of India
Department/Board : Press Release
Press Release No. : 2024-2025/32
Date : 04.04.2024
Notification/ Circulars Referred : A.P. (DIR Series) Circular No. 13 dated January 05, 2024 MANU/APDR/0001/2024;Notification No.
FEMA.25/RB-2000 dated May 03, 2000 MANU/RFEM/0017/2000; A.P. (DIR Series) Circular No. 147 dated June 20, 2014 MANU/APDR/0066/2014;Statement
on Developmental and Regulatory Policies dated December 08, 2023 MANU/RPRL/0760/2023
Subject: Banking
Citing Reference:
A.P. (DIR Series) Circular No. 13 dated January 05, 2024 MANU/APDR/0001/2024 Referred
Notification No.
FEMA.25/RB-2000 dated May 03, 2000 MANU/RFEM/0017/2000 Referred
A.P. (DIR Series) Circular No. 147 dated June 20, 2014 MANU/APDR/0066/2014 Referred
Statement
on Developmental and Regulatory Policies dated December 08, 2023 MANU/RPRL/0760/2023 Referred
Notification regarding Exchange Traded Currency Derivatives
In the recent period, some concerns have been expressed about participation in the exchange traded currency derivatives (ETCD) market in the light of the Reserve Bank of India's (RBI) A.P. (DIR Series) Circular No. 13 dated January 05, 2024.
It may be noted that the regulatory framework for participation in ETCDs
involving the Indian rupee (INR) is guided by the provisions of the Foreign
Exchange Management Act (FEMA), 1999 and regulations framed thereunder which
mandate that currency derivative contracts involving the INR-both
over-the-counter (OTC) and exchange traded-are permitted only for the purpose of
hedging of exposure to foreign exchange rate risks. The regulatory framework has
been reiterated in the Foreign Exchange Management (Foreign Exchange Derivative
Contracts) Regulations, 2000 dated May 03, 2000 (Notification No.
FEMA.25/RB-2000 dated May 03, 2000) amended on February 18, 2020 which states
that a person may enter into an ETCD contract involving the INR only for the
purpose of hedging a contracted exposure.
For the purpose of ease of doing business, the RBI's A.P. (DIR Series) Circular No. 147 dated June 20, 2014 permitted users of ETCDs to take positions up to USD 10 million per exchange without having to provide documentary evidence to establish the underlying exposure but did not provide any exemption from the requirement of having the exposure. Accordingly, users are expected to ensure compliance with the requirement of having underlying exposure. The limit of USD 10 million per exchange was subsequently amended and currently stands at a single limit of USD 100 million combined across all exchanges.
As announced in the........