The rules and what they cost

(a) Summarise, with dates, the April 2024 episode: the January 2024 Master Direction, what brokers did, and the RBI's 4 April 2024 clarification. Distinguish "the limit up to which documents are not required" from "permission to trade without exposure". (b) Under Circular No. 25 of 10 Oct 2026, can a firm with a genuine USD 4 million import payable hedge it on NSE without producing documents? Can an individual with no foreign-currency exposure take a USD 50,000 position? Explain. (c) An importer buys USD 10 million three months forward from its bank under the FERR of Circular No. 26. Assume spot 94.47, rates as in Problem 11.19, that the reserve earns nothing, that the bank's opportunity cost is 5.75% a year, and full pass-through. Compute the reserve, its cost in rupees and in paise per dollar, and the all-in forward rate. Express the cost as an annual percentage of notional and compare with the forward premium. (d) What does the FERR do to the importer's choice between an OTC forward, exchange-traded futures, and staying unhedged? What is the RBI trying to achieve, and what is the risk to the market?