RBI allows FIIs to hedge investments under ASBA route

MUMBAI: The Reserve Bank today allowed foreign institutional investors (FIIs) to hedge foreign currency risks arising out of investment in IPOs made through ASBA route.

"Initial Public Offers (IPO) related transient capital flows under the Application Supported by Blocked Amount(ASBA) mechanism, foreign currency-rupee swaps may be permitted to the FIIs," the RBI said.

Foreign currency rupee swaps for hedging flows under ASBA, RBI said, will be available for 30 days only.

The initiative is likely to facilitate FII investments under the ASBA route into equity market.

Under the Application Supported By Blocked Amount (ASBA) facility, the application money of investors remains blocked in his bank account until the process of allotment of shares is completed.

The Securities and Exchange Board of India (Sebi) had introduced ASBA facility for public offers first in September 2008 when retail investors were allowed to use it.

The facility eliminates any delays related to refunds for the unallocated shares. Initially, it was offered to retail investors only and was given to other investors in 2009.