RBI Relaxes Hedging Limits for Importers
After relaxing gold import norms and liberalising long-term export advances, the Reserve Bank of India (RBI) has now further eased hedging limits for importers and doubled the limit on booking forward contracts.
In a circular issued to authorised currency dealers, essentially commercial banks, the Reserve Bank said: “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% of the eligible limit.”
Importers are currently allowed to book contracts up to 25% of the eligible limit. The eligible limit is computed as the average of the previous three financial years’ import tur nover or the previous year’s actual import tur nover, whichever is higher.
Importers who have already booked contracts up to the previous limit of 25% in the current financial year will be eligible for the difference arising out of the enhanced limits.
It may be recalled that the central bank eased gold import rules last week amid a stronger rupee, indicating improvements in the external sector situation. Besides, the current account deficit in the balance of payments also ended in a modest deficit of 1.7% of GDP in FY14.
Importers can book forward contracts under the past performance route up to 50% of the eligible limit