Hedging of Overseas Direct Investments
A.P. (DIR Series) (2003-2004) Circular No. 47, DATED 12-12-2003
It has been
decided that henceforth resident entities having overseas direct investments
may be permitted to hedge the exchange risk arising out of such investments.
Accordingly, Authorised Dealers may enter into forward/option contracts with
residents who wish to hedge their overseas direct investments (in equity and
loan), subject to verification of such exposure and provided further that the
contracts are completed by delivery or rolled over on the due date.
2. If a hedge becomes naked in
part or full owing to shrinking of the market value of the overseas direct
investment, the hedge may continue to the original maturity. Roll-overs on the
due date shall be permitted upto the extent of market value as on that date.
3. Authorised Dealers may bring
the contents of this circular to the notice of their constituents concerned.
4. The directions contained in
this circular have been issued under section 10(4) and section 11(1) of the
Foreign Exchange Management Act, 1999 (42 of 1999).