Forward Contracts for FII s and NRI s

The provisions relating to booking of forward contracts by Foreign Institutional Investors ( FIIs) and Non Resident Indians (NRIs) have been relaxed significantly  by RBI in the recent times.

FOR FII s

AD Banks maintaining the accounts of FIIs provide forward cover with rupee as one of the currencies subject to the following :

a) hedging allowed up to market value of the entire investment by FII in equity and / or debt in India as on a particular date. In case hedge amount subsequently exceeds the underlying on account of shrinking of portfolio ( for reasons other than sale of securities), the hedge will be allowed to continue till maturity, if so desired.

b) Forward contracts, once cancelled may be permitted to be rebooked up to 2 % of the market value ( as at the begining of the financial year) of their investment in equity and / or debt in India. The contracts may be rolled over on or before maturity.

c) The cost of hedge is met out of repatriable funds and / or inward remittance through banking channels.

d) All outward remittances incidental to the hedge are net of applicable taxes.

e)  The eligibility for cover is determined on the basis of declaration by FII.

FOR  NRI s

AD Banks allow forward cover for NRI s in respect of

a) amount of dividend due to NRI s on shares held in Indian company.

b) Balances held in Foreign Currency Non Resident ( FCNR B) accounts  or Non Resident External (NRE) accounts with rupee as one of the currencies in  both these accounts. Cross Currency forward contracts ( not involving rupee) may also be booked to convert the balances in FCNRB accounts.

c) Amount of investments made in India under the Portfolio Investment Scheme in accordance with FEMA provisions.