MUMBAI, Jan 23 Asia Pulse - The Reserve Bank of India has allowed all authorised banks to grant permission to companies to hedge the price risk of of all commodities, barring gold, silver and platinum, in the international commodity markets.
"It has now been decided to permit all AD Category-I banks to grant permission to companies to hedge the price risk in respect of any commodity (except gold, silver, platinum) in the international commodity exchanges/markets as specified under the delegated route," the Reserve Bank said in a circular.
It further said such banks can now grant permission to unlisted companies to hedge the price risk on imports and exports for all the commodities, barring the three, in international markets.
"AD Category-I banks may submit an annual report... as on March 31 every year, within one month (before April 30th), giving the names of the corporates to whom they have granted permission for commodity hedging and the name of the commodity hedged," the Reserve Bank of India (RBI) said.
It said before permitting corporates to undertake hedge transactions, banks will have to ask for a brief description of the hedging strategy proposed, including the business activity and nature of risk and instruments proposed to be used for hedging.
Besides, they will have to furnish information like names of the commodity exchanges and brokers through whom the risk is proposed to be hedged and the credit lines proposed to be availed and the name and address of the regulatory authority in the country concerned may also be given.
Banks have also been asked to secure a copy of the management policy of the companies covering risk identification and their measurements, guidelines and procedures to be followed with respect to revaluation and monitoring of positions, and names and designations of officials authorised to undertake transactions and limits.
"Authorised Dealer may refuse to undertake any hedge transaction if it has a doubt about the bonafides of the transaction or the corporate is not exposed to price risk," the RBI said.
(PTI) nt 23-01 1423
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