As per recent RBI master circular , a person resident in India may enter into currency futures or currency options on a stock exchange recognized under section 4 of the Securities Contract (Regulation) Act, 1956, to hedge an exposure to risk or otherwise, subject to such terms and conditions as may be set forth in the directions issued by the Reserve Bank of India from time to time.”
General Permission to deal in Currency Future or Currency Option
i) Currency option contracts are permitted in US Dollar - Indian Rupee spot rate, or any other currency pairs, as may be approved by the Reserve Bank from time to time.
(ii) Only ‘persons resident in India’, as defined in section 2(v) of the Foreign Exchange Management Act, 1999 (Act 42 of 1999) are permitted to buy or sell exchange traded currency options to hedge an exposure to foreign exchange rate risk or otherwise.
Features of currency option contracts
Standardized exchange traded currency options shall have the following features:
b) The options shall be premium styled European call and put options.
c) The size of each contract shall be USD 1000.
d) The premium shall be quoted in Rupee terms. The outstanding position shall be in USD.
e) The maturity of the contracts shall not exceed twelve months.
f) The contracts shall be settled in cash in Indian Rupees.
g) The settlement price shall be the Reserve Bank’s Reference Rate on the date of expiry of the contracts.
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