Reserve Bank of India has relaxed the guidelines for domestic participants in the Exchange Traded Currency Derivatives (ETCD) market by increasing its position limits and rationalising documentation requirements for both importers and exporters.

The central bank increased the position limits — long (bought) as well as short (sold) — in the Exchange Traded Currency Derivatives (ETCD) market for domestic participants by $5 million.

The new position limit will be up to $15 million per exchange in the US Dollar (USD)–Indian Rupee (INR) currency pair.

Further, domestic participants will be allowed to take long as well as short positions in the Euro-INR, GBP (British Pound Sterling)-INR and Japanese Yen-INR pairs, all put together, up to $5 million equivalent per exchange.

“These limits shall be monitored by the exchanges and breaches, if any, may be reported. For the convenience of monitoring, exchanges may prescribe fixed limits for the contracts in currencies other than USD such that these limits are within the equivalent of $5 million,” the RBI said in a circular for banks authorised to deal in foreign exchange.

As a measure of liberalisation in the ETCD market, the RBI said instead of the statutory auditor’s certificate, a signed undertaking to the effect from the Chief Financial Officer (CFO) or the senior most functionary responsible for the company's finance and accounts and the Company Secretary (CS) may be produced.

In the absence of a CS, the Chief Executive Officer (CEO) or the Chief Operating Officer (COO) can co-sign the undertaking along with the CFO.

With a view to bringing at par both exporters and importers the RBI has allowed importers to take appropriate hedging positions up to 100 per cent of the eligible limit. At present, importers are permitted to hedge their contracted exposures in the ETCD market up to 50 per cent of their eligible limit.

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