Eligible residents are currently permitted to enter into FCY/INR swaps to hedge against exchange rate or interest rate risk exposure arising out of long-term foreign currency borrowings or to transform long-term Rupee borrowings into foreign currency liabilities. The existing rules did not allow re-booking or re-entering of swap transactions once they had been cancelled.
By way of a circular dated 13 February 2015, the Reserve Bank of India has allowed residents who have entered into a FCY-INR swap to re-enter into a fresh FCY-INR swap on cancellation of the original swap contract in cases where the underlying is still surviving, but only after the expiry of the tenor of the original cancelled swap contract.
Originally published in March 2015.
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