Reserve Bank of India
Exchange Control Department
Central Office
Mumbai
A.P.(DIR Series) Circular No.47
December 12, 2003
To
All Authorised Dealers in Foreign
Exchange
Madam/Sirs,
Hedging of Overseas Direct Investments
It has been decided that henceforth
resident entities having overseas direct investments may be permitted to
hedge the exchange risk arising out of such investments. Accordingly, Authorised
Dealers may enter into forward/option contracts with residents who wish
to hedge their overseas direct investments (in equity and loan), subject
to verification of such exposure and provided further that the contracts
are completed by delivery or rolled over on the due date.
2. 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-overs
on the due date shall be permitted upto the extent of market value as on
that date.
3. Authorised Dealers may bring
the contents of this circular to the notice of their constituents concerned.
4. The directions contained
in this circular have been issued under Section 10(4) and Section 11(1)
of the Foreign Exchange Management Act, 1999 (42 of 1999).
Yours faithfully,
(Grace Koshie)
Chief General Manager