Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Market / Stock-market-news/  RBI releases draft on hedging of commodity price risk in overseas markets
BackBack

RBI releases draft on hedging of commodity price risk in overseas markets

RBI has proposed to introduce a facility of hedging indirect price risk for select metals apart for allowing eligible companies to hedge their direct exposure

RBI draft norms says an eligible entity’s exposure is termed direct if it transacts in commodities whose prices are fixed by reference to an international benchmark or is defined by a formula. Indirect exposure is that where prices of commodities are not linked to a reference benchmark or formula. Photo: Aniruddha Chowdhury/MintPremium
RBI draft norms says an eligible entity’s exposure is termed direct if it transacts in commodities whose prices are fixed by reference to an international benchmark or is defined by a formula. Indirect exposure is that where prices of commodities are not linked to a reference benchmark or formula. Photo: Aniruddha Chowdhury/Mint

Mumbai: The Reserve Bank of India (RBI) Friday released draft norms for Indian companies to hedge their commodities exposure from fluctuating prices in overseas markets.

Apart for allowing eligible companies to hedge their direct exposure, the central bank has proposed to introduce a facility of hedging indirect price risk for select metals.

Hedging is an activity which involves a derivative transaction to minimise certain identified risks.

According to the draft norms, an eligible entity’s exposure is termed direct if it transacts in commodities whose prices are fixed by reference to an international benchmark or is defined by a formula. Indirect exposure is that where prices of commodities are not linked to a reference benchmark or formula.

Hedging of price risk is proposed to be allowed for all commodities in case of direct exposure. In case of indirect exposure, hedging is allowed for aluminium, copper, lead, zinc, nickel, and tin. This list would be reviewed annually, the draft said.

The RBI also said banks can permit eligible entities to hedge commodity price risk overseas using permitted instruments subject to certain conditions.

The central bank has sought comments on the draft by the end of January.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 13 Jan 2018, 01:01 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App