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RBI allows companies to access commodity exchanges for hedging price risks

The Reserve Bank of India on Monday allowed Indian corporates to access international commodity exchanges for hedging price risks, provided there exists a genuine underlying exposure.

The apex bank has earlier constituted a committee headed by then deputy governor R V Gupta on hedging through international commodity exchanges.

The RBI has also issued detailed operational guidelines for hedging of commodity price risks by corporates. The handling of applications of corporates by authorised dealers as also risk management, internal control, reporting and monitoring system to be put in place for derivative activity have been put in place.

Access to recognised international commodity exchanges would be through brokerage firms which are clearing members of these exchanges. This facility would not be allowed for oil and petroleum products.

All exchange traded future and option contracts would be allowed. Only offset hedge would be considered and the tenure of exposure will be six months, beyond which the RBI approval will be required.

UNI