Executive Summary:
This notification introduces the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Amendment Regulations, 2014. It permits individuals residing outside India, who meet specific investment criteria, to engage in currency futures or exchange-traded currency options on recognized stock exchanges to hedge risk exposures. These regulations take effect from the date of publication in the Official Gazette.
Key Points / Main Content:
* **Regulation Title:** Foreign Exchange Management (Foreign Exchange Derivative Contracts) Amendment Regulations, 2014.
* **Effective Date:** From the date of publication in the Official Gazette.
* **Amendment:** Inserts Regulation 5B after Regulation 5A.
* **Regulation 5B: Currency Futures/Exchange Traded Currency Options**
* Allows persons resident outside India, eligible to invest in securities under specific schedules of FEMA 2000, to enter into currency futures or exchange-traded currency options.
* Purpose: To hedge exposure to risk.
* Venue: A stock exchange recognized under Section 4 of the Securities Contracts Regulations Act, 1956.
* Subject to terms and conditions set forth by the Reserve Bank of India.
Impact Analysis:
**Persons Resident Outside India Eligible to Invest in Securities:**
* *Impact:* Now permitted to use currency futures or exchange-traded currency options to hedge risk exposure in accordance with FEMA regulations.
* *Action Required:* Comply with the terms and conditions set by the Reserve Bank of India for engaging in derivative contracts.
**Reserve Bank of India:**
* *Impact:* Responsible for setting the terms and conditions for eligible persons resident outside India engaging in currency futures and exchange-traded currency options.
* *Action Required:* Issue directions outlining the specific terms and conditions for participation in these contracts.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the foreign exchange market and issuing regulations related to foreign exchange management.
Foreign Exchange Management Act, 1999: An act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Foreign Exchange Management Foreign Exchange Derivative Contracts Regulations, 2000: Regulations issued by the Reserve Bank of India governing foreign exchange derivative contracts.
Mumbai, Maharashtra: The city in India where the Central Office of the Reserve Bank of India is located.
Securities Contracts Regulations Act, 1956: An act of the Parliament of India that provides for regulation of transactions in securities and control of stock exchanges.
Foreign Exchange Management Transfer or Issue of Security by a person resident outside India Regulations, 2000: Regulations pertaining to the transfer or issue of security by a person resident outside India
Official Gazette: A government publication where official notifications and regulations are published.
S. M. PILLAI: General Manager Incharge at Reserve Bank of India who signed the notification.
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RESERVE BANK OF INDIA
(Foreign Exchange Department)
(CENTRAL OFFICE)
NOTIFICATION
Mumbai, the 21st May, 2014
Foreign Exchange Management (Foreign Exchange Derivative Contracts)
(Amendment) Regulations, 2014
G.S.R. 374(E).— In exercise of the powers conferred by clause (h) of sub-section (2) of Section 47
of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank hereby makes the following
amendments in the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations,
2000 (Notification No.FEMA 25/2000-RB dated 3rd May 2000) namely:-
1. Short Title and Commencement
(i) These Regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative
Contracts) (Amendment) Regulations, 2014.
(ii) They shall come into force from the date of their publication in the Official Gazette.
2. Amendment of Regulations:
After Regulation 5A Regulation 5B shall be inserted as below:
“Permission to a person resident outside India to enter into currency futures or exchange traded
currency options
A person resident outside India who is eligible to invest in securities as laid down in Schedules 2, 5, 7 and
8 of Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India)
Regulations, 2000 (FEMA 20/2000-RB dated May 3, 2000 (GSR 406 (E) dated May 3, 2000)) as
amended from time to time, may enter into currency futures or exchange traded currency options contracts
on a stock exchange recognised under section 4 of Securities Contracts (Regulations) Act, 1956 to hedge
an exposure to risk, subject to such terms and conditions as may be set forth in the directions issued by the
Reserve Bank of India from time to time.”
[No.FEMA 303/2014-RB]
S. M. PILLAI, General Manager In-charge
Footnote:-1. The Principal Regulations were published in the Official Gazette vide G.S.R. No.411(E) dated
May 8, 2000 in Part II, Section 3, sub-section (i) and subsequently amended vide -
G.S.R.No. 756(E) dated 28.09.2000
G.S.R.No. 264(E) dated 09.04.20024 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
G.S.R.No. 579(E) dated 19.08.2002
G.S.R.No. 222(E) dated 18.03.2003
G.S.R.No. 532(E) dated 09.07.2003
G.S.R.No. 880(E) dated 11.11.2003
G.S.R.No. 881(E) dated 11.11.2003
G.S.R.No. 750(E) dated 28.12.2005
G.S.R.No. 222(E) dated 19.04.2006
G.S.R.No. 223(E) dated 19.04.2006
G.S.R.No. 760(E) dated 07.12.2007
G.S.R.No. 577(E) dated 05.08.2008
G.S.R.No. 440(E) dated 23.06.2009
G.S.R.No. 895(E) dated 14.12.2009
G.S.R.No. 635(E) dated 27.07.2010
G.S.R.No. 608(E) dated 03.08.2012
G.S.R.No. 799(E) dated 30.12.2012
G.S.R.No. 330(E) dated 23.05.2013
Printed by the Manager, Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054