FEM (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) (AMENDMENT) REGULATIONS, 2016 – SUBSTITUTION OF REGULATION 4 AND AMENDMENT IN SCHEDULE 1

NOTIFICATION NO.FEMA 365/2016-RB/GSR 571(E), DATED 1-6-2016

In exercise of the powers conferred by clause (h) of sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank hereby makes the following amendments in the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification No.FEMA 25/2000-RB dated 3rd May 2000) namely:—

Short Title and Commencement

1. (i) These Regulations may be called the Foreign Exchange Management (Foreign Exchange Derivative Contracts) (Amendment) Regulations, 2016.

(ii) They shall come in to force from the date of their publication in the Official Gazette.

Amendment of Regulations

2. (i) The existing Regulation 4 shall be substituted by the following:

“A person resident in India may enter into a foreign exchange derivative contract in accordance with provisions contained in Schedule I, to hedge an exposure to risk or otherwise, in respect of a transaction permissible under the Act, or rules or regulations or directions or orders made or issued thereunder.”

(ii) In Schedule I, after the existing paragraph ‘B’, the following shall be added, viz.:

“(C) Writing of standalone options against underlying exposure

A person resident in India may enter into cross-currency option contract (not involving the rupee as one of the currencies) and/or foreign currency – rupee option contract authorised dealer against an underlying foreign exchange exposure in respect of a transaction for which sale and/or purchase of foreign currency is permitted under the Act or the rules or regulations or directions or orders made or issued thereunder subject to such terms and conditions as may be stipulated by the Reserve Bank from time to time.”