Forward cover for FIIs- Rebooking of cancelled contracts
As per the existing provisions, a registered Foreign Institutional Investor (FII) is permitted to enter into forward contracts with rupee as one of the currencies, with an AD Category - I bank in India to hedge its exposure in India subject to the condition that forward contracts once cancelled shall not be rebooked but may be rolled over on or before maturity.
Now the RBI has issued revised guidelines
++ AD Category - I banks may allow FIIs to cancel and rebook forward contracts up to a limit of 2 per cent of the market value of their entire investment in equity and / or debt in India.
++The limit for calculating the eligibility for rebookings shall be based upon market value of the portfolio as at the beginning of the financial year.
++ The outstanding contracts must be duly supported by underlying exposure at all times.
A. P. (DIR Series). CIRCULAR NO. 32/RBI., Dated, February 8, 2007