RBI sets up committee to review commodity hedging risks

RBI's move was followed by the exposure of Indian equities to commodity price risks which has been highlighted by the growing integration of Indian economy with the rest of the world and rising volumes cross border trading.

The working group involved members of RBI, the market regulator Securities and Exchange Board of India (Sebi), commercial banks and corporates. Photo: Wikipedia

Key Highlights:
Assess the risks faced by resident entities and their hedging requirements,

Identify gaps in the existing regulatory framework in relation to the hedging requirements viz. coverage of commodities, participants and products,

Suggest the broad principles for guiding the regulatory regime for overseas hedging of commodity risks,

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Recommend a modified framework for residents hedging commodity risk overseas,

Any other related matter.

The Reserve Bank of India (RBI) on Wednesday set up a working group to review guidelines for hedging risk in commodity trading.

The working group involved members of RBI, the market regulator Securities and Exchange Board of India (Sebi), commercial banks and corporates.

As per RBI, the working group is expected to refer terms which included risks faced by resident equities and their hedging requirements.

Moreover, the group will identify gap in the existing regulatory framework in relation to the hedging requirements viz. coverage of commodities, participants and products.

It will also suggest broad principles for guiding the regulatory regime for overseas hedging of commodity risks and lastly recommend a modified framework for residents hedging commodity risk overseas.

RBI said that resident entities exposed to commodity price risks, industry bodies, members of academia and other interested parties may mail their suggestions or comments.

The working group is expected to submit its report by February 28, 2017.

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