Hedging will provide foreign investors to cover against currency fluctuation at the time of repatriation of the income arising out their investment in debt.
"It has been decided to permit FPIs to hedge the coupon receipts arising out of their investments in debt securities in India falling due during the following 12 months subject to the condition that the hedge contracts shall not be eligible for rebooking on cancellation," RBI said in a statement.
The step has been taken to enhance the hedging facilities for FPIs holding securities under the Portfolio Investment Scheme. It will encourage investments in debt and deepen the domestic debt market.