RBI Increases Past Performance Hedging Limit for Importers to 50%
Current · Source: Reserve Bank of India · RBI/2013-14/613 · issued 27 May 2014 · ~1 min read
Quick answerRBI has raised the past performance hedging limit for resident importers from 25% to 50% of the eligible limit, effective from the date of the circular (May 27, 2014). This gives importers more flexibility to manage currency risk on probable exposures.
The rule, in the simplest words
Importers can now hedge up to 50% of their eligible limit instead of the old 25% limit.
The eligible limit is the higher of the average import turnover of the last three years or the actual import turnover of the previous year.
If an importer already booked contracts up to 25% this year, they can now book the extra difference up to 50%.
AD Category‑I banks must inform their customers about this new limit while keeping all other rules unchanged.
How it plays out — a real example
Rahul, a foreign‑exchange officer at a Category‑I bank in Mumbai, greets Anil, the owner of a textile import firm, with a friendly smile. He explains that because RBI has lifted the past‑performance hedging limit to 50%, Anil can now lock in an additional 25% of his forward contracts to protect against rupee swings. Rahul helps Anil place the new contracts, ensuring the process is smooth and compliant.
What changed
The eligible limit for booking forward contracts under the past performance route for resident importers has been increased from 25% to 50% of the eligible limit. The eligible limit remains the higher of the average of the previous three financial years' import turnover or the previous year's actual import turnover. Importers who already booked contracts up to the old 25% limit in the current financial year can now book the additional difference up to the new 50% limit.
What it means for you
AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers. This change provides importers with greater flexibility in hedging facility.
What you must do
Bring the contents of this circular to the notice of your constituents and customers.
Ensure compliance with all other existing operational guidelines, terms and conditions which apply mutatis mutandis.
Who it affects
AD Category-I banks, Resident importers using past performance hedging
❓ Common questions
How is the eligible limit calculated for past performance hedging?
The eligible limit is the higher of the average of the previous three financial years' import turnover or the previous year's actual import turnover.
Can importers who already booked contracts at 25% now book more?
Yes, they are eligible to book the difference between the new 50% limit and the amount already booked in the current financial year.
Does this circular change any other operational guidelines?
No, all other operational guidelines, terms, and conditions remain unchanged and apply mutatis mutandis.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/613
A.P.(DIR Series) Circular No.135
May 27, 2014
To
All Category - I Authorised Dealer Banks
Madam / Sir,
Risk Management and Inter Bank Dealings
Attention of Authorised 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 ) as amended from time to time and A.P. (DIR Series) circular no. 32 dated December 28, 2010 , as amended from time to time, and A.P. (DIR Series) circular no. 114 dated March 27, 2014 .
2. Under the extant guidelines relating to hedging of currency risk of probable exposures based on past performance, resident importers are allowed to book contracts up to 25 per cent of the eligible limit. The eligible limit is computed as the average of the previous three financial years’ import turnover or the previous year’s actual import turnover, whichever is higher.
3. On a review of the evolving market conditions and with a view to providing importers with greater flexibility in hedging facility, it has been decided to allow importers to book forward contracts, under the past performance route, up to 50 per cent of the eligible limit. Importers who have already booked contracts up to previous limit of 25 per cent in the current financial year, shall be eligible for difference arising out of the enhanced limits. All other operational guidelines, terms and conditions shall apply mutatis mutandis.
4. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.
5. 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
Rudra Narayan Kar
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/613 · issued 27 May 2014. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (AD Category-I banks, Resident importers using past performance hedging), your first concrete step on “RBI Increases Past Performance Hedging Limit for Importers to 50%” is: “Bring the contents of this circular to the notice of your constituents and customers.” (RBI issued this 27 May 2014).
Circular: RBI/2013-14/613 -- RBI Increases Past Performance Hedging Limit for Importers to 50%
Issued: 27 May 2014
Action required: Bring the contents of this circular to the notice of your constituents and customers.
Action required: Ensure compliance with all other existing operational guidelines, terms and conditions which apply mutatis mutandis.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8906&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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