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Regulations Relaxed on Gold Price Risk Hedging in Overseas Markets

In alignment with the Statement on Developmental and Regulatory Policies introduced as part of the Bi-monthly Monetary Policy Statement for 2023-24 on February 08, 2024, the Reserve Bank of India (RBI) has issued a circular dated April 15, 2024, granting resident entities greater flexibility in managing their exposure to gold price fluctuations.  

Previously, resident entities were authorized to hedge their exposure to the price risk of gold exclusively on exchanges within the International Financial Services Centre (IFSC) recognized by the International Financial Services Centres Authority (IFSCA), as per Circular No. 19 dated December 12, 2022. However, in a bid to provide greater flexibility in managing gold price risk exposures, the RBI has opted to allow them to hedge such exposures using Over the Counter (OTC) derivatives in the IFSC, in addition to derivatives available on exchanges within the IFSC.

This direction is subject to the conditions outlined in the Master Direction Foreign Exchange Management (Hedging of Commodity Price Risk and Freight Risk in Overseas Markets) Directions, 2022, amended from time to time and shall be applicable to All Authorised Dealer Category – I Banks from April 15, 2024.