Page 51 - Banking Finance December 2022

RBI CIRCULAR

“Commission, Exchange and Brokerage” exceeds one 4. The directions contained in this circular have been
per cent of the total income. issued under Sections 10(4) and 11(1) of the Foreign
Exchange Management Act, 1999 (42 of 1999) and are
5. We also invite attention to Clause 6 of the Chapter IV
without prejudice to permissions/ approvals, if any,
of the Directions ibid, in terms of which more
required under any other law.
comprehensive disclosures than the minimum required
are encouraged, especially if such disclosures
significantly aid in the understanding of the financial Hedging of Gold Price Risk in Overseas
position and performance of banks.
Markets
Applicability
December 12, 2022
6. These instructions are applicable to all commercial
banks. These instructions shall come into effect for 1. Please refer to Paragraph 4 of the Statement on
disclosures in the notes to the annual financial Developmental and Regulatory Policies announced as
statements for the year ending March 31, 2023 and a part of the Bi-monthly Monetary Policy Statement
onwards. for 2022-23 dated December 07, 2022 regarding
hedging of price risk of gold in overseas markets.
7. The Reserve Bank of India (Financial Statements -
Attention is also invited to the Hedging of Commodity
Presentation and Disclosures) Directions, 2021 shall
Price Risk and Freight Risk in Overseas Markets (Reserve
stand updated to reflect these changes.
Bank) Directions, 2018 dated March 12, 2018, as
amended from time to time.
Hedging of Commodity Price Risk and
2. Resident entities in India are currently not permitted
Freight Risk in Overseas Markets
to hedge their exposure to price risk of gold in overseas
December 12, 2022 markets. On a review, it has been decided to permit
eligible entities to hedge their exposure to price risk of
1. Attention of Authorised Dealer Category - I (AD Cat-I) gold on exchanges in the International Financial Services
Centre (IFSC) recognised by the International Financial
banks is invited to Regulation 6 and 6A of the Foreign
Services Centres Authority (IFSCA).
Exchange Management (Foreign Exchange Derivative
Contracts) Regulations, 2000 dated May 3, 2000 3. The Master Direction – Foreign Exchange Management
(Notification No. FEMA. 25/RB-2000 dated May 3, (Hedging of Commodity Price Risk and Freight Risk in
2000), as amended from time to time, issued under Overseas Markets) Directions, 2022 (A. P. (DIR Series)
clause (h) of sub-section (2) of Section 47 of Foreign Circular No. 21 dated December 12, 2022) have been
Exchange Management Act, 1999 (Act 42 of 1999) as issued today and are enclosed herewith.
amended from time to time.
4. The directions contained in this circular have been
2. Within the contours of the Regulations, the Reserve issued under Sections 10(4) and 11(1) of the Foreign
Bank issues directions to Authorised Persons under Exchange Management Act, 1999 (42 of 1999) and are
Section 11 of the Foreign Exchange Management Act, without prejudice to permissions/ approvals, if any,
1999 (Act 42 of 1999). These Directions lay down the required under any other law.
modalities for the AD Cat-I banks for facilitating hedging
of commodity price risk and freight risk in overseas
Revised Regulatory Framework for Urban
markets by their customers / constituents.
Co-operative Banks (UCBs) – Net Worth
3. The Master Direction – Foreign Exchange Management
(Hedging of Commodity Price Risk and Freight Risk in and Capital Adequacy
Overseas Markets) Directions, 2022 are enclosed herewith.
December 1, 2022
AD Cat-I banks may bring the contents of these Directions
to the notice of their customers / constituents concerned. 1. Please refer to the Revised Regulatory Framework for

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