BW Communities

RBI Imposes Curbs On Forward Contracts To Check Re Slide

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[The Reserve Bank on Thursday swung into action to check slide in rupee value against dollar and speculations by imposing restrictions with immediate effect on forward trading in the local currency by FIIs and traders and capped banks exposure to the forex market. The Reserve Bank of India (RBI) has decided to withdraw the facility of re-booking forex contracts by companies and Foreign Institutional Investors (FIIs) and reduced across-the- board exposure limits of banks which are authorised to deal in the foreign currency. The central bank said these steps have been taken in view of the "developments in the foreign exchange market". The rupee today slipped to sub-54 level for the first time in its history and touched a low of 54.30 against the dollar. In the last nearly four and half months, the rupee has declined by about 20 per cent against the dollar. The forward contracts booked by resident, irrespective of the type and tenor of the underlying exposure, "once canceled cannot be re-booked", RBI said in a notification. It has also reduced the limit for hedging of foreign currency risks for importers/exporters from 75 per cent to 25 of the average actual import\export turnover in the past three years. It further said all the forward contracts booked by exporters and importers would be on "fully deliverable basis. In case of cancellations, exchange gain, if any, should be passed on to the customer". (PTI)