The Reserve Bank of India on Thursday clarified the scope of its recent measures to curb currency risks, specifying which rupee-linked foreign exchange derivative contracts will attract a 20% reserve requirement and exempting certain transactions from the rules.
In frequently asked questions (FAQs) document, the RBI said the Foreign Exchange Risk Reserve (FERR) requirement would apply to specified derivatives undertaken by authorised dealers with users where the user is purchasing foreign currency against the rupee, the contract's notional value exceeds $2 million equivalent and the transaction is intended to hedge current account exposures.
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