The Reserve Bank of India has allowed non-residents to hedge their currency risk in respect of external commercial borrowings (ECB) denominated in rupees, with AD Category-I (authorised dealer) banks in India.

In its notification on Thursday, the apex bank said the amount and tenor of the hedge should not exceed that of the underlying transaction. Besides, it should be in consonance with the extant regulations regarding tenor of payment or realisation of the proceeds.

The NGOs (non-Government organisations) engaged in microfinance activities have been permitted to avail themselves of ECBs designated in Indian rupee under the automatic route from overseas organisations and individuals as per the ECB guidelines.

The RBI said that the contracts, once cancelled, cannot be rebooked. The contracts may, however, be rolled over on or before maturity. On cancellation of the contracts, gains may be passed on to the customer.

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