Risk Hedging

Article

Hedging of Currency Risk arising out of Trade Transactions by Residents under Contracted Route

Draft guidelines

With a view to easing the process of hedging, RBI has proposed to introduce a more liberalized framework for importers and exporters by reducing the documentary requirements for hedging trade transactions under the contracted exposure route in line with the announcement to this effect made in the Monetary Policy statement dated September 29, 2015.

Under the extant regulatory framework under FEMA, 1999 and Regulations1 thereunder, the various routes available to residents intending to hedge currency risk are as follows:

i. Exposure based on underlying contracts
ii. Probable Exposures based on Past Performance
iii. Special Dispensation for SMEs and Individuals

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