MUMBAI: India's central bank said it had eased rules for hedging foreign exchange exposures, allowing greater flexibility for canceling and rebooking forward contracts.

The Reserve Bank of India is now allowing domestically-held forward contracts for all current as well as capital account transactions with a residual maturity of one year or less to be freely cancelled and taken out again, called rebooking.

Foreign investors will be allowed to rebook 10 percent of the value of cancelled contracts, up from nothing previously.

Before the changes domestic exporters could cancel and rebook up to 50 percent of the contracts booked in a financial year for hedging their contracted export exposures. Importers are allowed to cancel and rebook up to 25 percent of contracts booked in a financial year.

These limits have been dropped.

The RBI had issued several strictures on rupee trading after the Indian currency started slumping since late May on fears that the US federal reserve will begin tapering its monetary stimulus.

The rupee plunged to a record low of 68.85 to the dollar in late August but has recovered after the central bank took steps to bolster forex reserves, including raising $34 billion through two concessional swap facilities.