Authorised dealers may offer forward cover to:
(A) Foreign Institutional Investors (Fund-wise or FII-wise) for their investments in India as detailed below:
(a) Debt instruments To the entire extent of the current market value.
(b) Equity (Portfolio) 15% of the market value (reckoning pipeline transactions) as at the close of business on 31st March 1999 converted at the rate of US$ 1 = Rs.42.43 and the increase in market value/inflows subsequent to that date. Forward Cover once taken may be allowed to continue so long as it does not exceed the value of the underlying investment.
Note: Applications for need-based additional limit may be made to the Chief General Manager, Exchange Control Department (Forex Markets Division), Reserve Bank of India, Central Office, Mumbai 400 001.
(B) Non-Resident Indians (NRIs) and Overseas Corporate Bodies (OCBs):
(a) Portfolio investments On the same terms as applicable to equity investments of FIIs [cf. item (A)(b) above and the Note thereunder].
(b) Balances held in FCNR/Non-Resident (External) Rupee accounts and the interest payable thereon. Entire amount
(i) The cover may be provided only by the designated account-maintaining banks.
(ii) Eligibility for cover may be determined on the basis of the declaration of the FII. A quarterly review may be undertaken on the basis of market price movements, fresh inflows, amounts repatriated and other relevant parameters to ensure that the forward cover outstanding is supported by underlying exposure.
(iii) The cost of roll-overs should be met out of repatriable funds/inward remittance.
(iv) All outward remittances incidental to the hedge may be allowed subject to the payment of tax, if any.
(v) In these cases, the contracts once cancelled cannot be re-booked. They may, however, be rolled over on or before the maturity.
(vi) In respect of forward cover to FIIs, a monthly statement should be furnished to the Chief General Manager, Reserve Bank of India, Exchange Control Department (Forex Markets Division), Central Office, Mumbai 400001 before the 10th of the succeeding month indicating the name of the FII/Fund, the eligibility, amount of cover and the actual amount of cover.
(C) To non-resident shareholders for the amount of dividend due to them on shares held in Indian companies on repatriation basis For the actual amount of dividend due.