What changed
RBI issued Master Circular No. 06/2009-10 on July 1, 2009, consolidating existing instructions on risk management and inter-bank dealings into a single document. The circular included a sunset clause, meaning it would stand withdrawn on July 1, 2010 and be replaced by an updated version.
What it means for you
Banks and authorised dealers now have a single reference for all rules on forward contracts, currency futures, commodity hedging, and non-resident bank accounts. The sunset clause signals that RBI expects regular updates, so banks must stay alert for the next circular. This consolidation simplifies compliance but requires banks to track the expiry date.
What you must do
- Review the consolidated instructions in this Master Circular for all risk management and inter-bank dealings.
- Ensure your bank's internal policies align with the provisions on forward contracts, currency futures, and commodity hedging.
- Prepare for the circular's expiry on July 1, 2010 and monitor for the updated version.
- Verify that all underlying exposures for forward contracts are properly documented as per the circular.
Who it affects
All Authorised Dealers - Category I banks, Persons resident in India (importers, exporters, entities hedging commodity price risk), Non-resident banks and exchange houses, Foreign Institutional Investors (FIIs) and Non-resident Indians (NRIs)
What is the sunset clause in this Master Circular?
The circular includes a sunset clause stating it will stand withdrawn on July 1, 2010 and be replaced by an updated Master Circular on the same subject.
Can forward contracts be booked without exact exposure amount?
Yes, if the exact amount of the underlying transaction is not ascertainable, the contract can be booked on the basis of a reasonable estimate, subject to AD Category I bank verification.
Does this circular cover hedging for foreign currency loans?
Yes, foreign currency loans/bonds are eligible for hedge only after final approval is accorded by the Reserve Bank, where such approval is necessary, or Loan Registration Number (LRN) is given by the Reserve Bank.