Risk Management and Inter-bank Dealings: Revised Position Limits for Foreign Portfolio Investors (FPIs) in the Exchange Traded Currency Derivatives (ETCD) market

Risk Man­age­ment and Inter-bank Deal­ings: Revised Posi­tion Lim­its for For­eign Port­fo­lio Investors (FPIs) in the Exchange Trad­ed Cur­ren­cy Deriv­a­tives (ETCD) market

Atten­tion of Autho­rized Deal­ers Cat­e­go­ry – I (AD Cat­e­go­ry – I) banks is invit­ed to the For­eign Exchange Man­age­ment (For­eign Exchange Deriv­a­tive Con­tracts) Reg­u­la­tions, 2000 dat­ed May 3, 2000 (Noti­fi­ca­tion No. FEMA. 25/RB-2000 dat­ed May 3, 2000), as amend­ed from time to time and A.P. (DIR Series) Cir­cu­lar 148 dat­ed June 20, 2014 relat­ing to par­tic­i­pa­tion of For­eign Port­fo­lio Investors (FPIs) in the ETCD market.

Increase in lim­its with­out estab­lish­ing under­ly­ing exposure

2. Present­ly, FPIs can take posi­tion – both long (bought) as well as short(sold) – in for­eign cur­ren­cy up to USD 10 mil­lion or equiv­a­lent per exchange . As a mea­sure of fur­ther lib­er­al­i­sa­tion, it has now been decid­ed to increase the lim­it (long as well as short) for FPIs in USD-INR pair upto USD 15 mil­lion per exchange. In addi­tion, FPIs shall be allowed to take long (bought) as well as short (sold) posi­tions in EUR-INR, GBP-INR and JPY-INR pairs, all put togeth­er, upto USD 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 USD 5 million.

3. All oth­er oper­a­tional guide­lines, terms and con­di­tions shall remain unchanged.

4. This cir­cu­lar has been issued under Sec­tions 10 (4) and 11(1) of the For­eign Exchange Man­age­ment Act, 1999 (42 of 1999) and is with­out prej­u­dice to per­mis­sions / approvals, if any, required under any oth­er law.