Question

According to the RBI’s revised guidelines on hedging

Q: Answer-According to the RBI’s revised guidelines on hedging foreign exchange risk, a user can enter into fo...

The circular Risk Management and Inter-Bank Dealings Hedging of Foreign Exchange Risk requires users who take positions beyond USD 100 million to submit a quarterly risk exposure report to the RBI through their Authorized Dealer.

foreign exchange risk, a user can enter into foreign exchange derivative contracts without underlying exposure within a prescribed limit. Which of the following best describes the documentation required for users seeking to take positions beyond USD 100 million?

A The user must submit a letter of credit for the entire notional value of the derivatives.

B The user must provide audited financial statements showing the contracted exposure

C The user must submit a board resolution authorizing foreign exchange transactions beyond the limit.

D The user must provide a quarterly risk exposure report to the RBI via the designated Authorized Dealer

E The user must ensure that any unhedged positions are closed within 30 days of reaching the USD 100 million limit.

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According to the RBI’s revised guidelines on hedging

Solution