RBI Re­laxes Hedg­ing Lim­its for Im­porters

The Economic Times - - Markets & Finance - OUR BUREAU

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

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