Booking of Forward Contracts Based on Past Performance

By Vijay Kumar

At present, banks allow importers and exporters to book forward contracts on the basis of a declaration of an exposure and based on past performance upto the average of the previous three financial years (April to March) actual import/export turnover or the previous year's actual import/export turnover, whichever is higher, subject to the specified conditions. Forward contracts booked in excess of 25 per cent of the eligible limit shall be on a deliverable basis and cannot be cancelled. The aggregate forward contracts booked during the year and outstanding at any point of time should not exceed the eligible limit. Further, the eligible limits are to be computed separately for import and export transactions.

In the liberalization and flexible era, the RBI has made 25% as 50%.

CIRCULAR NO. 22/RBI., Dated: December 13, 2006