The RBI on Tuesday revised the guidelines on foreign exchange derivative contracts, removing the cap of $100 million on swap transactions. The move will help companies increase net supply of the foreign currency. ?On a review, it has been decided to remove the above limit of $100 million placed for these swap transactions,”said RBI.
According to experts, the move is intended to allow banks to sell more currency swaps to companies with overseas debt at a time when the currency market is highly volatile. As per the guidelines issued in 2010, swap transactions by banks acting as intermediaries were allowed by matching the requirements of corporate counter-parties. While no limit was placed for undertaking swaps to facilitate customers to hedge their foreign exchange exposures, a “limit of $ 100 million was placed for net supply of foreign exchange in the market on account of swaps which facilitate customers to assume foreign currency liability”.
