A. P. (DIR Series) Circular No. 21
August 31, 2012
All Category-I Authorised Dealer Banks
Madam / Sir,
Foreign investment by Qualified Foreign Investors (QFIs) – Hedging facilities
Attention of Authorized Dealers Category – I (AD Category – I) banks is invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 [Notification No. FEMA/25/RB-2000 dated May 3, 2000] and A.P. (DIR Series) Circular No.32 dated December 28, 2010, as amended from time to time.
2. In terms of A.P. (DIR Series) Circular No.8 dated August 9, 2011, A.P. (DIR Series) Circular No. 42 dated November 3, 2011, A.P. (DIR Series) Circular No. 66 dated January 13, 2012 and A.P. (DIR Series) Circular No. 89 dated March 1, 2012, Qualified Foreign Investors (QFI) are allowed to invest in rupee denominated units of domestic Mutual Funds and listed equity shares and allowing SEBI registered FIIs to invest in to be listed debt securities subject to the terms and conditions mentioned therein.
Further, in terms of A.P. (DIR Series) Circular No. 7 dated July 16, 2012, Qualified Foreign Investors (QFIs) have been permitted to purchase on repatriation basis debt securities subject to the various terms and conditions. As per para 2(x) of the circular, QFIs would be permitted to hedge their currency risk on account of their permissible investments (in equity and debt instruments) in terms of the guidelines issued by the Reserve Bank from time to time.
3. It has now been decided to allow QFIs to hedge their currency risk on account of their permissible investments (in equity and debt instruments), as per the details given in the Annex.
4. Necessary amendments to the Notification No. FEMA.25/RB-2000 dated May 3, 2000 [Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000] are being notified separately.
5. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers.
6. 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.
(Rudra Narayan Kar)
Chief General Manager
[Annex to A.P. DIR Circular No.21
dated August 31 , 2012]
Facilities for Qualified Foreign Investors (QFIs)
To hedge the currency risk on the market value of entire investment in equity and/or debt in India as on a particular date.
Forward foreign exchange contracts with rupee as one of the currencies and foreign currency-INR options. Foreign Currency – INR swaps for IPO related flows.
Operational Guidelines, Terms and Conditions
For IPO related transient capital flows