What changed
Previously, only forward contracts with tenor up to one year (or export contracts beyond one year) could be freely cancelled and rebooked. Now, all forward contracts for current account transactions—any tenor—can be freely cancelled and rebooked. The relaxation does not apply to contracts booked on past performance without documents or those denominated in foreign currency but settled in INR.
What it means for you
Banks can offer clients greater flexibility in hedging current account exposures, reducing the risk of locked-in contracts. This may increase demand for forward contracts and improve client satisfaction. However, banks must ensure clients submit annual exposure details before allowing cancellation/rebooking.
What you must do
- Update internal policies to allow free cancellation and rebooking of all forward contracts for current account transactions, regardless of tenor.
- Ensure corporate clients submit annual exposure details (as on April 1) before permitting cancellation/rebooking.
- Consolidate and forward corporate-wise exposure data to RBI's Forex Markets Division by June 30 each year.
- Communicate the revised guidelines to all constituents and customers.
Who it affects
Authorised dealer banks, Resident corporate clients with forex exposures, Importers and exporters, Non-trade current account users
Does this circular apply to forward contracts for capital account transactions?
No, the relaxation is only for current account transactions. For capital account exposures beyond one year, the earlier rule—once cancelled, cannot be rebooked—still applies.
What happens if a client has not submitted their annual exposure details?
The facility of cancellation and rebooking should not be permitted until the client submits the required exposure information as on April 1 of the year.