RBI issues guidelines for forex hedging by foreign companies

Reserve Bank of India (RBI) issued draft guidelines on how Indian subsidiaries of multinational companies can hedge their currency exposure risk in the country.

RBI said on Friday that subsidiaries looking to hedge their exposure outside of exports and imports could do so through all foreign currency-rupee derivatives, over-the-counter, and exchange-traded products.

It also said profits and losses arising from hedging transactions in India must be reflected in the books of the domestic subsidiaries of multinational companies, among other guidelines.

Previously, multinational companies could only hedge currency risk arising out of transactions involving imports and exports.

The RBI had said last month that it would widen the scope of activities where hedging was allowed.

Market participants and banks can submit their comments about the proposed guidelines by Nov. 11, the RBI said.