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RBI relaxes forex hedging norms for exporters, importers

28 Mar 2014 Evaluate

In order to give more operational flexibility to country’s exporters and importers, the Reserve Bank of India (RBI) relaxed some restrictions relating to hedging of currency risk of probable exposures of exporters and importers.

The RBI notified that importers and exporters can cancel up to 75 percent of their hedged forex exposures, as against 25 percent earlier. The profit or loss from these cancellations will be borne by the importer/exporter instead of passing it on to the customers as was mandated earlier. Further, the notification added that the contracts in excess of 75 per cent of the eligible limit shall be on deliverable basis and cannot be cancelled.

Regarding the procedure for determination of eligible limit, the central bank noted that eligible limit in the case of exporters is computed as the average of the previous three financial years’ (April to March) actual export turnover or the previous year’s actual export turnover, whichever is higher. In the case of importers, the eligible limit is calculated as 25 percent of the average of the previous three financial years’ actual import turnover or the previous year’s actual import turnover, whichever is higher.

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