Rules on equity forward contracts may be lifted

The government is considering deregulation of forward contracts, or put and call options for equity, in an attempt to boost merger and acquisition ( M& A) activity in India.

Companies agreeing to joint ventures ( JVs) usually enter into forward contracts where one company can buy the other’s shares and sell them back at a predetermined price.

Restrictions on such put and call options have been revised a number of times. Since the passage of the Finance Bill 2015, oversight of such instruments has shifted from the Reserve Bank of India ( RBI) to the finance ministry.

The government is looking at relaxing rules governing forward contracts for companies, and one option is complete deregulation.

Business Standard, New Delhi, 22nd July 2015

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