A.P. (DIR Series) Circular No.15
All Category-I Authorised Dealer
Madam / Sir
Commercial Borrowings (ECB) Policy – Review of Hedging Provision
Attention of Authorized Dealer
Category-I (AD Category-I) banks is invited to paragraphs 2.4.2 and 2.5
of Master Direction No.5 dated January 1,
2016 on “External Commercial Borrowings, Trade Credit,
Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons
other than Authorised Dealers”, as amended from time to time and A. P. (DIR
Series) Circular No. 11 dated November 06, 2018, in terms of which certain
eligible borrowers raising foreign currency denominated ECBs under Track I,
having an average maturity between 3 and 5 years, are mandatorily required
to hedge their ECB exposure fully.
2. On a further review of the
extant provisions, it has been decided, in consultation with the Government
of India, to reduce the mandatory hedge coverage from 100 per cent to 70
per cent for ECBs raised under Track I of the ECB framework by eligible
borrowers given at paragraph 2.4.2 (vi) of the aforesaid Master Direction
for a maturity period between 3 and 5 years. Further, it is also clarified
that ECBs falling within the aforesaid scope but raised prior to the date
of this circular will be required to mandatorily roll-over their existing
hedge(s) only to the extent of 70 per cent of outstanding ECB exposure.
3. All other provisions of the
ECB policy remain unchanged. AD Category - I banks should bring the
contents of this circular to the notice of their constituents and
4. The aforesaid Master Direction No. 5 dated January 01, 2016 is
being updated to reflect the changes.
5. The directions contained in
this circular have been issued under section 10(4) and 11(2) of the Foreign
Exchange Management Act, 1999 (42 of 1999) and are without prejudice to
permissions / approvals, if any, required under any other law.