**Summary:**
RBI Circular RBI20242517 A. P. DIR Series Circular No. 01, dated April 15, 2024, issued by the Reserve Bank of India (RBI), expands hedging options for resident entities managing gold price risk. The circular amends the Master Direction Foreign Exchange Management Hedging of Commodity Price Risk and Freight Risk in Overseas Markets Directions, 2022, effective immediately.
Previously, resident entities were permitted to hedge gold price risk only on exchanges within the International Financial Services Centre (IFSC). This update now permits resident entities to utilize Over-the-Counter (OTC) derivatives in the IFSC for hedging gold price risk, in addition to exchange-traded derivatives, subject to the stipulations outlined in the aforementioned Master Direction, as amended.
The regulatory change aims to provide increased flexibility to resident entities in managing their exposure to gold price volatility.
The circular is issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and does not supersede any other legal requirements.
For inquiries, contact the Financial Markets Regulation Department, Central Office, 9th Floor, Central Office Building, Shahid Bhagat Singh Road, Fort, Mumbai – 400 001. Tel: 9122 2260 1000, Fax: 9122 22702290, Email: cgmfmrdrbi.org.in. The circular was signed by Dimple Bhandia, Chief General Manager.
Key Entities Referenced
Reserve Bank of India: The central bank of India, which issued the circular.
All Authorised Dealer Category I Banks: The entities to whom the circular is addressed.
International Financial Services Centre: A financial hub where resident entities were permitted to hedge gold price risk.
International Financial Services Centres Authority: The regulatory authority for International Financial Services Centres.
Foreign Exchange Management Act, 1999: The Indian law under which the circular's directions are issued.
Master Direction Foreign Exchange Management Hedging of Commodity Price Risk and Freight Risk in Overseas Markets Directions, 2022: A set of guidelines issued by the Reserve Bank of India concerning hedging of commodity price risk.
Mumbai, Maharashtra: Location of the Central Office of the Financial Markets Regulation Department of RBI
Dimple Bhandia: Chief General Manager at Reserve Bank of India
भारतीय �रज़व� ब�क
RESERVE BANK OF INDIA
RBI/2024-25/17
A. P. (DIR Series) Circular No. 01 April 15, 2024
All Authorised Dealer Category – I Banks
Madam / Sir,
Hedging of Gold Price Risk in Overseas Markets
Please refer to Paragraph 2 of the Statement on Developmental and Regulatory
Policies announced as a part of the Bi-monthly Monetary Policy Statement for 2023-
24 dated February 08, 2024, regarding hedging of price risk of gold in overseas
markets. Attention is also invited to the Master Direction – Foreign Exchange
Management (Hedging of Commodity Price Risk and Freight Risk in Overseas
Markets) Directions, 2022.
2. Resident entities were permitted to hedge their exposure to price risk of gold on
exchanges in the International Financial Services Centre (IFSC) recognised by the
International Financial Services Centres Authority (IFSCA) vide A. P. (DIR Series)
Circular No. 19 dated December 12, 2022. To provide further flexibility to resident
entities to hedge their exposures to price risk of gold, it has now been decided to permit
resident entities to hedge their exposures to price risk of gold using OTC derivatives
in the IFSC in addition to the derivatives on the exchanges in the IFSC, subject to the
stipulations set out in the Master Direction – Foreign Exchange Management (Hedging
of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022, as
amended from time to time.
िव�ीय बाज़ार िविनयमन िवभाग, क��ीय कायार्लय, 9वी मंिजल, केन्�ीय कायार्लय भवन, शहीद भगत �संह माग,र् फोटर्, मुंबई – 400 001
फोन: (91-22) 2260 1000, फैक्स: (91-22) 22702290, ई-मले : cgmfmrd@rbi.org.in
Financial Markets Regulation Department, Central Office, 9th Floor, Central Office Building, Shahid Bhagat Singh Road, Fort,
Mumbai – 400 001
Tel: (91-22) 2260 1000, Fax: (91-22) 22702290, E-mail: cgmfmrd@rbi.org.in
�हन्द� आसान है, इसका प्रयोग
बढ़ाइए3. These instructions shall be applicable with immediate effect. The Master Direction
– Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk
in Overseas Markets) Directions, 2022 has been updated accordingly.
4. The directions contained in this circular have been issued under Sections 10(4) and
11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without
prejudice to permissions/ approvals, if any, required under any other law.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
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