(i) Authorised dealers may offer the undernoted products to corporates either on a back-to-back basis or by booking the transaction overseas with the branch of an authorised dealer in India.

(a) Interest rate swaps

(b) Currency swaps

(c) Coupon swaps

(d) Interest rate caps/collars (purchase)

(e) Forward Rate Agreements

(ii) Before entertaining any request for any of these facilities, the authorised dealer should ensure that

(a) the Reserve Bank has accorded final approval for the conclusion of the underlying loan transaction;

(b) the notional principal amount of the hedge does not exceed the outstanding amount of the foreign currency loan;

(c) the maturity of the hedge does not exceed the remaining life to maturity of the underlying loan;

(d) the Board of Directors of the corporate has drawn up a risk management policy, laid down clear guidelines for concluding transactions, and institutionalised arrangements for a quarterly review of operations and annual audit of transactions to verify compliance with the regulations.

(e) the hedge results in reduction of the risk of exposure and there is no net inflow of premium, direct or implied in cases where option components are built into the hedge strategy;

(iii) Corporates may be permitted to unwind a hedge transaction.

(iv) A report of the transaction (booked/cancelled), verified by the authorised dealer should be submitted to the concerned Regional Office of the Reserve Bank, within a week of its conclusion.

(v) Authorised dealers should obtain from the concerned corporates copies of the quarterly reviews and annual audit reports vide paragraph (ii) (d) above.

(vi) Payment of upfront premia, if any, as well as all other charges incidental to the hedge transaction may be effected without the prior approval of Reserve Bank.