India cbank to let oil firms hedge imports offshore

< The Reserve Bank of India on Tuesday said it would allow Indian oil firms to hedge crude imports on overseas exchanges, and increased the limit on firms' investments in the overseas energy and natural resources sectors.

The central bank said domestic refining companies would be able to hedge their anticipated crude oil in overseas exchanges and markets, with a limit of up to 50 percent of the volume of actual imports in the previous year or 50 percent of the average volume of the past three fiscal years, whichever was higher.

The central bank also said it would allow domestic crude oil refining companies to hedge their price risk on domestic purchases of crude oil and sales of petroleum products on the basis of underlying contracts linked to international prices on overseas exchanges or markets.

In a separate notification, the central bank said companies would be allowed to invest abroad in excess of 400 percent of their net worth, as on the date of their last audited balance sheet, in the energy and natural resources sector.

Such investments would require prior approval from the central bank. Further, Indian entities could invest up to 400 percent of their net worth in overseas unincorporated entities in the oil sector, with prior approval of the RBI. Previously, only certain public sector companies were able to make such investments.