The Reserve Bank of India (RBI) has decided to permit banks to grant permission to companies, including unlisted companies, to hedge the price risk in respect of any commodity (except gold, silver, platinum) in the international commodity exchanges/markets.
The banks were asked to submit an annual report to the RBI as on March 31 every year, within one month (before April 30), giving the names of the corporates to whom they have granted permission for commodity hedging and the name of the commodity hedged.
Before permitting the corporates to undertake hedge transactions, the banks would require them to submit a brief description of the hedging strategy proposed, including, instruments proposed to be used for hedging, the names of the commodity exchanges and brokers through whom the risk is proposed to be hedged and the credit lines proposed to be availed. The name and address of the regulatory authority in the country concerned may also be given, size/average tenure of exposure and/or total turnover in a year, together with expected peak positions thereof and the basis of calculation.
Keywords: commodity price risk