What changed
The existing limit of 2% for FIIs to cancel and rebook forward contracts has been enhanced to 10% of the market value of the portfolio as at the beginning of the financial year. This change is effective immediately, while all other operational guidelines and terms remain the same.
What it means for you
This gives FIIs greater flexibility to manage their currency exposure, potentially reducing hedging costs and encouraging more active portfolio management. For AD Category-I banks, it means increased transaction volumes and the need to update internal systems and client advisories to reflect the new limit.
What you must do
- Update internal systems and procedures to reflect the new 10% rebooking limit for FII forward contracts.
- Communicate the revised limit to all relevant constituents and customers, especially FII clients.
- Ensure compliance with all other unchanged operational guidelines from the December 28, 2010 circular.
- Monitor FII transactions to prevent exceeding the enhanced limit.
Who it affects
AD Category-I banks, Foreign Institutional Investors (FIIs), Treasury and forex operations teams, Compliance departments
What is the new limit for FII forward contract rebooking?
The limit has been increased from 2% to 10% of the market value of the FII's portfolio as at the beginning of the financial year.
When does this change take effect?
The enhancement is effective immediately from the date of the circular, May 20, 2011.
Are any other guidelines changing?
No, all other operational guidelines and terms and conditions from the earlier circular remain unchanged.