Executive Summary:
This notification from the Reserve Bank of India amends the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations of 2000. The amendment allows residents in India to enter into cross-currency option contracts or foreign currency-rupee option contracts against underlying foreign exchange exposure, subject to specific terms. These regulations took effect on June 1, 2016.
Key Points / Main Content:
Amendment Regulations, 2016:
* These regulations are called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Amendment Regulations, 2016.
* They came into force on the date of their publication in the Official Gazette: June 1, 2016.
Amendment of Regulations:
* Regulation 4 is substituted: A resident in India can enter into a foreign exchange derivative contract as per Schedule I, to hedge risk or otherwise, for permissible transactions.
* Schedule I is amended: Paragraph C is added.
Writing Standalone Options:
* A resident in India can enter into a cross-currency option contract (not involving the rupee) or a foreign currency-rupee option contract with an authorized dealer.
* This is permitted against an underlying foreign exchange exposure for transactions where foreign currency sale/purchase is allowed under the Act, rules, regulations, directions, or orders.
* This is subject to terms and conditions stipulated by the Reserve Bank.
Impact Analysis:
Residents in India:
* Impact: Residents in India now have the option to engage in more types of foreign exchange derivative contracts, specifically cross-currency and foreign currency-rupee options, to hedge against foreign exchange exposure.
* Action Required: Residents should familiarize themselves with the terms and conditions stipulated by the Reserve Bank for these new types of derivative contracts before entering into them.
Authorized Dealers:
* Impact: Authorized Dealers are now permitted to offer cross-currency and foreign currency-rupee option contracts to residents in India.
* Action Required: Authorized Dealers must comply with the terms and conditions stipulated by the Reserve Bank when offering these contracts.
Reserve Bank of India:
* Impact: The Reserve Bank of India is responsible for stipulating the terms and conditions under which residents can enter into these new types of foreign exchange derivative contracts.
* Action Required: The Reserve Bank needs to establish and communicate the specific terms and conditions for these transactions.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the financial system.
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 pertaining to foreign exchange derivative contracts, issued under the Foreign Exchange Management Act.
Foreign Exchange Derivative Contracts Amendment Regulations, 2016: Amendments to the Foreign Exchange Management Foreign Exchange Derivative Contracts Regulations.
Mumbai, Maharashtra: Location of the Central Office of the Financial Markets Regulation Department of the Reserve Bank of India.
Official Gazette: A government publication for official notices and regulations.
Schedule I: A schedule within the Foreign Exchange Management Foreign Exchange Derivative Contracts Regulations that outlines specific provisions.
R. SUBRAMANIAN: Chief General Manager at Reserve Bank of India.
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पपपपाााादददद (cid:5)(cid:5)(cid:5)(cid:5)टटटट(cid:7)(cid:7)(cid:7)(cid:7)पपपपणणणणीीीी :::: 1. मूल िविनयमावली 8 मई 2000 के सा.का.िन. सं. 411(अ), भाग II, खंड 3, उप-खंड (i) के तहत सरकारी
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सा.का.िन. सं. 756(अ) 5दनाकं 28.09.2000 सा.का.िन. स.ं 760(अ) 5दनांक 07.12.2007
सा.का.िन. स.ं 264(अ) 5दनांक 09.04.2002 सा.का.िन. स.ं 577(अ) 5दनांक 05.08.2008
सा.का.िन. स.ं 579(अ) 5दनांक 19.08.2002 सा.का.िन. स.ं 440(अ) 5दनांक 23.06.2009
सा.का.िन. स.ं 222(अ) 5दनांक 18.03.2003 सा.का.िन. स.ं 895(अ) 5दनांक 14.12.2009
सा.का.िन. स.ं 532(अ) 5दनांक 09.07.2003 सा.का.िन. स.ं 635(अ) 5दनांक 27.07.2010
सा.का.िन. स.ं 880(अ) 5दनांक 11.11.2003 सा.का.िन. स.ं 608(अ) 5दनांक 03.08.2012
सा.का.िन. स.ं 881(अ) 5दनांक 11.11.2003 सा.का.िन. स.ं 799(अ) 5दनांक 30.12.2012
सा.का.िन. स.ं 750(अ) 5दनांक 28.12.2005 सा.का.िन. सं. 330(अ) 5दनांक 23.05.2013
सा.का.िन. स.ं 222(अ) 5दनांक 19.04.2006 सा.का.िन. सं. 374(अ) 5दनांक 02.06.2014
सा.का.िन. स.ं 223(अ) 5दनांक 19.04.2006
RESERVE BANK OF INDIA
(Financial Markets Regulation Department)
(CENTRAL OFFICE)
NOTIFICATION
Mumbai, the 1st June, 2016
No. FEMA. 365/2016-RB
Foreign Exchange Management (Foreign Exchange Derivative Contracts)
(Amendment) Regulations, 2016
G.S.R. 571(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:—¹Hkkx IIµ[k.M 3(i)º Hkkjr dk jkti=k % vlk/kj.k 3
1. Short Title and Commencement
(i) These Regulations may be called the Foreign Exchange Management (Foreign Exchange
Derivative Contracts) (Amendment) Regulations, 2016.
(ii) They shall come in to force from the date of their publication in the Official Gazette.
2. Amendment of Regulations:
(i) The existing Regulation 4 shall be substituted by the following:
“A person resident in India may enter into a foreign exchange derivative contract in accordance with
provisions contained in Schedule I, to hedge an exposure to risk or otherwise, in respect of a
transaction permissible under the Act, or rules or regulations or directions or orders made or issued
thereunder.”
(ii) In Schedule I, after the existing paragraph ‘B’, the following shall be added, viz.:
“(C) Writing of standalone options against underlying exposure
A person resident in India may enter into cross-currency option contract (not involving the rupee as
one of the currencies) and / or foreign currency – rupee option contract authorised dealer against an
underlying foreign exchange exposure in respect of a transaction for which sale and / or purchase of
foreign currency is permitted under the Act or the rules or regulations or directions or orders made
or issued thereunder subject to such terms and conditions as may be stipulated by the Reserve Bank
from time to time.”
[F. No. 1/15/EM-2015]
R. SUBRAMANIAN, Chief General Manager
Foot Note : 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. 760(E) dated 07.12.2007
G.S.R. No. 264(E) dated 09.04.2002 G.S.R. No. 577(E) dated 05.08.2008
G.S.R. No. 579(E) dated 19.08.2002 G.S.R. No. 440(E) dated 23.06.2009
G.S.R. No. 222(E) dated 18.03.2003 G.S.R. No. 895(E) dated 14.12.2009
G.S.R. No. 532(E) dated 09.07.2003 G.S.R. No. 635(E) dated 27.07.2010
G.S.R. No. 880(E) dated 11.11.2003 G.S.R. No. 608(E) dated 03.08.2012
G.S.R. No. 881(E) dated 11.11.2003 G.S.R. No. 799(E) dated 30.12.2012
G.S.R. No. 750(E) dated 28.12.2005 G.S.R. No. 330(E) dated 23.05.2013
G.S.R. No. 222(E) dated 19.04.2006 G.S.R. No. 374(E) dated 02.06.2014
G.S.R. No. 223(E) dated 19.04.2006
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.