Liberalization Of Overseas Direct Investment Hedged By Residents

Earlier, the Reserve Bank of India ("RBI") had permitted resident entities having overseas direct investments in equity and loans, to hedge the exchange risk arising out of such investments. Accordingly, authorised dealers were permitted to enter into forward / option contracts with residents desirous of hedging their exchange risks, provided that such exposure was verified and the contracts were concluded by delivery or rolled over on the due date. Cancellation of the contracts was not permitted.

In order to accord enhanced flexibility to overseas direct investments of residents in equity and loans, RBI has on 19th June 2007 decided to permit the cancellation of forward contracts. Pursuant to such liberalization, authorised dealers are now entitled to permit cancellation of the forward contracts entered into by residents for hedging their exchange risk in overseas direct...