Draft directions on hedging of commodity price released by RBI
14 January, 2018
The Reserve Bank has proposed delegating to clients the decisions regarding the quality and tenor on hedging of commodity prices and freight risk. In its draft directions on the subject, the RBI has also proposed introducing the facility for hedging of indirect price risk for selected metals.
Hedging refers to activity undertaken to reduce an identifiable and measurable risk. "Eligible entities having exposure to commodity price risk for any eligible commodity may hedge such exposure in overseas markets using any of the permitted instruments," the draft said. The Reserve Bank of India (RBI) has invited comments on the draft directions from banks, market participants and other interested parties by January 31.