The Head/Principal Offices of all

Authorized Dealers in Foreign Exchange

Dear Sirs/Madam,

Forward Cover Facilities against Imports

Attention of Authorized Dealers is invited to F.E. Circular No. 06 dated December 21, 2011 in terms of which instructions on the forward cover facility provided by Authorized Dealers against imports were further streamlined.

In this regard, certain queries have been raised which are clarified as under:

1. In all cases the maturity of the forward contract against import should coincide with the maturity of the underlying letter of credit. In case of a usance L/C which requires payment to be made after a given number of days of shipment and the shipment date has been determined on or before the L/C expiry date, the forward contract can be rolled over on forward maturity date to coincide with L/C payment date, subject to the condition that the roll over is not for less than one month. In case the shipment period is not determined on the L/C expiry date, forward cover cannot be rolled over and has to be closed out at the prevailing exchange rate on the L/C expiry date.
2. Where L/C payment is due before L/C expiry/forward maturity, forward contract would have to be taken up on the date when the payment is due for delivery to the customer.
3. Even in cases where partial shipments are allowed, the forward contract against import should coincide with the maturity of the underlying letter of credit. In case of partial payment prior to the L/C expiry date, the forward contract can be taken up to the extent of the partial payment. In case of partial payments after the L/C expiry date please refer to our clarification at S. No.1 above.