Page 51 - Banking Finance April 2018

RBI CIRCULAR

Hedging of Commodity Price Risk and guidelines would be permitted to continue hedging
under the said approval till June 30, 2018 or the last
Freight Risk in Overseas Markets
date specified in the approval, whichever is earlier.
(Reserve Bank) Directions 4. The relevant instructions on the subject contained in

RBI/2017-18/138 the following circulars stand withdrawn as on April 1,
2018:
A.P. (DIR Series) Circular No. 19
i. A. P. (DIR Series) Circular No. 68 dated January 17,
2012 on "Risk Management and Inter-Bank
1. Attention of Authorised Dealer Category - I (AD
Dealings - Commodity Hedging"
Category-I) banks is invited to regulation 6 and 6A of
the Foreign Exchange Management (Foreign Exchange ii. Section E and F of A. P. (DIR Series) circular no. 32
Derivative Contracts) Regulations, 2000 dated May 3, dated December 28, 2010 on "Comprehensive
2000 (Notification No.FEMA. 25/RB-2000 dated May 3, Guidelines on Foreign Exchange Derivatives and
2000) issued under clause (h) of sub-section (2) of Overseas Hedging of Commodity Price and Freight
Section 47 of FEMA, 1999 (Act 42 of 1999), as amended Risks" and the relevant appendices.
from time to time. iii. A. P. (DIR Series) Circular No.35 dated November
2. RBI had earlier constituted a Working Group to review 10, 2008 on "Remittance related to Commodity
the guidelines for Hedging of Commodity Price Risk by Derivative Contract Issuance of Standby Letter of
Residents in overseas markets (Chairman: Shri Chandan Credit / Bank Guarantee"
Sinha). Based on the report of the working group and 5. AD Category - I banks may bring the contents of this
comments received on the report, draft directions for circular to the notice of their constituents and
hedging of commodity price risk and freight risk were customers concerned.
released for comments on Jan 12, 2018. Based on the
6. The directions contained in this circular have been
feedback to the draft directions, the Hedging of
issued under Sections 10(4) and 11(1) of the Foreign
Commodity Price Risk and Freight Risk in Overseas Exchange Management Act, 1999 (42 of 1999) and are
Markets (Reserve Bank) Directions, 2018 have been
without prejudice to permissions /approvals, if any,
finalized and are enclosed herewith. The revised
required under any other law.
directions shall come into force from April 1, 2018.
3. Residents hedging their commodity price risk and Yours faithfully
freight risk under a specific approval from RBI given (T. Rabi Sankar)
under the approval route based on the previous set of Chief General Manager
PIL against section 21A of the Banking Regulation Act

A PIL was filed by a batch of public-spirited persons led by Jayant Verma, challenging the constitutional validity of Section
21A of the Banking Regulation Act. According to the petitioners, as many as 256,913 farmers had committed suicide in
India between 1995 and 2010. The suicides are directly linked to usurious rates of interest being charged from them by
banks, which cannot be interfered with by courts, on account of the immunity provided to them under Section 21A, the
petition said. Senior advocates appearing for the RBI and the Centre defended the provision on the ground that Article
246 of the Constitution vested Parliament to make any law, even if it is conflict with laws framed by the states.

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