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March 26, 2002 | 1140 IST
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RBI eases rules on import hedging from April

The Reserve Bank of India on Tuesday relaxed rules on hedging of imports, saying it will permit re-booking of cancelled forward transactions from April 1.

The RBI said in a statement the relaxation will apply to imports and non-trade related transactions up to 100 per cent of the unhedged exposures falling due within one year, but subject to a cap of $100 million in a financial year per firm.

The ban on reinstating import hedges once they are cancelled was imposed in 1998 to reduce volatility and speculation in the aftermath of the country's nuclear tests, which were followed by economic sanctions.

The RBI said exporters would continue to enjoy the current freedom to re-book cancelled contracts without any limit.

"This liberalisation is expected to enable resident corporates to undertake active risk management and to bring about an overall reduction in their cost of operations without disturbing the market," it said.

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