Forward cover for exim trade hiked to 100%

MUMBAI: The RBI has relaxed norms relating to booking of forward contracts and allowed exporters and importers to book forward contracts up to 100% of their eligible limit against the existing ceiling of 50%. The 50% ceiling is based on past three years performance.

This means that if a customer has foreign currency exposure of $100m in a year, under the current scheme, its outstanding contracts under the facility at any point of time should not exceed $50m. Under the relaxed guideline, the exporter or the importer will be allowed to book the entire $100m exposure. Further, importers and exporters can approach the RBI for approval of higher limits.

Forex dealers said given the volatility in the market, very few traders use even the 50% existing limit. The RBI has maintained that the contracts booked in excess of 25% of the eligible limit are not allowed to be cancelled. Further, it has allowed authorised dealers to issue guarantees, letters of comfort and letters of undertaking for import of non-capital goods.


The RBI has set up an internal group to review the initiatives taken by it so far in the forex market and identify areas for further improvements.

The group would look at the market developments in terms of products and participants, regulatory regime in the current and evolving circumstances, international experience relating to markets and suggest appropriate approaches for further liberalisation. The group would consult market participants and submit its report within three months up to $20m per transaction for a period up to one year for import of all non-capital goods permissible under Foreign Trade Policy (except gold) and up to three years for import of capital goods, subject to prudential guidelines. Currently, ADs are required to obtain RBI’s approval for undertaking such activity.