The Reserve Bank of India (RBI) on Friday further eased exchange control norms. The central bank has decided to allow foreign institutional investors (FII) to enter into a forward contract with the rupee as one of the currencies, with an authorised dealer (AD) in India to hedge their entire exposure in equities at a particular point of time without any reference to the cut-off date. At present, a registered FII is permitted to hedge only upto 15 per cent of the market value of the equity (as the close of business as on March 1999) plus the increase in market value. However, forward contracts if once cancelled will not be rebooked, the RBI said.The RBI has also increased ADs’ overseas market investment limit to 50 per cent of their unimpaired tier-1 capital or $25 million, whichever is higher. Earlier, ADs were permitted to invest only upto 25 per cent of unimpaired tier 1 capital or $10 million, whichever is higher. It may be noted that, recently, the central bank had allowed banks to invest undeployed foreign currency non-resident (FCNR-B) funds in the overseas markets in long-term fixed income securities with ratings a notch lower than highest safety.
