TaxTMI 
TaxTMI 
Master Circular on Risk Management and Inter-Bank Dealings.
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....dated Master Circular on the subject. Yours faithfully, (Rudra Narayan Kar) Chief General Manager ============= Document 1 INDEX PART - A........ RISK MANAGEMENT SECTION I..... 3 3 .3 Facilities for Persons Resident in India other than Authorised Dealers Category-I....... 3 SECTION II Facilities for Persons Resident outside India SECTION III .... Facilities for Authorised Dealers Category-1. PART B... ACCOUNTS OF NON-RESIDENT BANKS........ PART C........... -------------- INTER-BANK FOREIGN EXCHANGE DEALINGS PART D.......... REPORTS TO THE RESERVE BANK .............. Annex I.... Annex II. Annex III Annex IV.... Annex V.... Annex VI.... Annex VII....... Annex VIII.. Annex IX.... Annex X...... Annex XI... Annex XII.. Annex XIII.. Annex XIV Annex XV Annex XVI Annex XVII Annex XVIII Annex XIX Annex XX Appendix....... 34 34 .42 .42 46 46 49 49 53 53 56 59 62 63 64 65 .... 66 67 69 .70 .71 .75 76 77 78 .79 .81 82 .83 .84 84 website: www.fema.rbi.org.in 2 email....
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....r, booking of permissible derivative contracts in future may be allowed only against production of the underlying documents, at the time of booking the contract. The products available under this facility are as follows: i) Forward Foreign Exchange Contracts Participants Market-makers - AD Category I banks Users -Persons resident in India Purpose a) To hedge exchange rate risk in respect of transactions for which sale and /or purchase of foreign exchange is permitted under the FEMA 1999, or in terms of the rules/regulations/directions/orders made or issued there under. b) To hedge exchange rate risk in respect of the market value of overseas direct investments (in equity and loan). i) Contracts covering overseas direct investment (ODI) can be cancelled or rolled over on due dates. If a hedge becomes naked in part or full owing to contraction ( due to price movement/impairment) of the market value of the ODI, the hedge may be allowed to continue until maturity, if the customer so desires. Rollovers on due date shall be permitted up to the extent of the market value as on that date. c) To hedge exchange rate risk of trans....
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....edge capital account transactions for tenor greater than one year if cancelled with one AD Category I bank can be rebooked with another AD Category I bank, subject to the following conditions: (i) the switch is warranted by competitive website: www.fema.rbi.org.in 5 rates on offer, email: [email protected] termination of banking relationship with the AD Category I bank with whom the contract was originally booked; (ii) the cancellation and rebooking are done simultaneously on the maturity date of the contract; and (iii) the responsibility of ensuring that the original contract has been cancelled rests with the AD Category I bank who undertakes rebooking of the contract. h) The facility of rebooking should not be permitted unless the corporate has submitted the exposure information as prescribed in Annex V. i) Substitution of contracts for hedging trade transactions may be permitted by an AD Category I bank on being satisfied with the circumstances under which such substitution has become necessary. The AD Category I bank may also verify the amount and tenor of the underlying substituted. ii) Cross Currency Options (no....
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....) All guidelines applicable for foreign currency-INR foreign exchange forward contracts are applicable to foreign currency-INR option contracts also. e) AD Category I banks having adequate internal control, risk monitoring/ management systems, mark to market mechanism, etc. are permitted to run a foreign currency- INR options book on prior approval from the Reserve Bank, subject to conditions. AD Category I banks desirous of running a foreign currency-INR options book and fulfilling minimum eligibility criteria website: www.fema.rbi.org.in email: [email protected] 7 listed below, may apply to the Reserve Bank with copies of approval from the competent authority (Board/ Risk Committee/ ALCO), detailed memorandum in this regard, specific approval of the Board for the type of option writing and permissible limits. The memorandum put up to the Board should clearly mention the downside risks, among other matters. Minimum Eligibility Criteria: i. Net worth not less than Rs 300 crore ii. CRAR of 10 per cent iii. Net NPAs not exceeding 3 per cent of the net advances iv. Continuous profitability for at least three years The Reser....
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....ential requirements, such as risk management systems and natural hedges or economic exposures. In the absence of natural hedges or economic exposures, the INR-foreign currency swap (to move from rupee liability to a foreign currency liability) may be restricted to listed companies or unlisted companies with a minimum net worth of Rs 200 crore. Further, the AD Category | bank is required to examine the suitability and appropriateness of the swap and be satisfied about the financial soundness of the corporate. Purpose To hedge exchange rate and/or interest rate risk exposure for those having long- term foreign currency borrowing or to transform long-term INR borrowing into foreign currency liability. Operational Guidelines, Terms and Conditions a) No swap transactions involving upfront payment of Rupees or its equivalent in any form shall be undertaken. b) The term “long-term exposure†means exposures with residual maturity of one year or more. website: www.fema.rbi.org.in 9 email: [email protected] c) The swap transactions, once cancelled, shall not be rebooked or re- entered, by whichever mechanism or b....
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....n of the structure with the largest notional, computed over the tenor of the structure, should be reckoned for the purpose of underlying. e) The delta of the options should be explicitly indicated in the term sheet. f) AD Category I banks may, stipulate additional safeguards, such as, continuous profitability, higher net worth, turnover, etc depending on the scale of forex operations and risk profile of the users. g) The maturity of the hedge should not exceed the maturity of the underlying transaction and subject to the same the users may choose the tenor of the hedge. In case of trade transactions being the underlying, the tenor of the structure shall not exceed two years. h) The MTM position should be intimated to the users on a periodical basis. vi) Hedging of Borrowings in foreign exchange, which are in accordance with the provisions of Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000. website: www.fema.rbi.org.in 11 email: [email protected] Products - Interest rate swap, Cross currency swap, Coupon swap, Cross currency option, Interest rate cap or collar (purchases), Forward....
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....standing contracts at any point of time should not exceed • the eligible limit i.e. the average of the previous three financial years' actual export turnover or the previous year's actual export turnover, whichever is higher for exports. • Twenty five percent of the eligible limit i.e. the average of the previous three financial years' actual import turnover or the previous year's actual import turnover, whichever is higher for imports. In case of importers who have already utilised in excess of the revised / reduced limit as on 16 th December 2011 for the Financial Year 2011- 12, no further bookings may be allowed under this facility. c) All forward contracts booked under this facility by both exporters and importers hence forth (i.e. from 16th December 2011 onwards) will be on fully deliverable basis. In case of cancellations, exchange gain, if any, should not be passed on to the customer. d) These limits shall be computed separately for import/export transactions. website: www.fema.rbi.org.in 13 email: [email protected] e) Higher limits will be permitted on a case-by-case basis on application to the Foreig....
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....tage. In addition to the customer declarations, AD Category I banks should also assess the past transactions with the customers, turnover, etc. k) AD Category I banks are required to submit a monthly report (as on the last Friday of every month) on the limits granted and utilised by their constituents under this facility as prescribed in Annex X. 3) Special Dispensation i) Small and Medium Enterprises (SMEs) Participants Market-makers - AD Category I. Users - Small and Medium Enterprises (SMEs) Purpose 2 To hedge direct and / or indirect exposures of SMEs to foreign exchange risk Product Forward foreign exchange contracts Operational Guidelines: Small and Medium Enterprises (SMEs) having direct and / or indirect exposures to foreign exchange risk are permitted to book / cancel / / roll over forward contracts without production of underlying documents to manage their exposures effectively, subject to the following conditions: a) Such contracts may be booked through AD Category I banks with whom the SMEs have credit facilities and the total forward contracts booked should be in alignment with the credit facilities avai....
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....neral Instructions for OTC forex derivative contracts entered by Residents in India While the guidelines indicated above govern specific foreign exchange derivatives, certain general principles and safeguards for prudential considerations that are applicable across the OTC foreign exchange derivatives, are detailed below. In addition to the guidelines under the specific foreign exchange derivative product, the general instructions should be followed scrupulously by the users (residents in India other than AD Category I banks) and the market makers (AD Category I banks). a) In case of all forex derivative transactions [except INR- foreign currency swaps i.e. moving from INR liability to foreign currency liability as in section B para I(1)(iv)] is undertaken, AD Category I banks must take a declaration from the clients that the exposure is unhedged and has not been hedged with another AD Category I bank. The corporates should provide an annual certificate to the AD Category I bank certifying that the derivative transactions are authorized and that the Board (or the equivalent forum in case of partnership or proprietary firms) is aware o....
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....iligence regarding 'user appropriateness' and 'suitability' of products before offering derivative products (except forward contracts) to users as detailed in .No.BP.BC. 44 /21.04.157/2011-12 dated November 2, 2011. i) AD Category I may share with the user the various scenario analysis encompassing both the possible upside as well as the downsides and sensitivity analysis identifying the various market parameters that affect the product. j) The provisions of comprehensive guidelines on Derivatives issued vide DBOD.No.BP.BC. 86/21.04.157/2006-07 dated April 20, 2007 and as amended from time to time are also applicable to forex derivatives. k) Sharing of information on derivatives between banks is mandatory and as detailed vide circular DBOD.No.BP.BC.46/08.12.001/2008-09 dated September 19, 2008 and DBOD.No. BP. BC. 94/ 08.12.001/2008-09 dated December 8, 2008. website: www.fema.rbi.org.in 18 email: [email protected] 4. Currency Futures on recognised Stock /New Exchanges As part of further developing the derivatives market in India and adding to the existing menu of foreign exchange hedging tools available to the residents....
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.... of the Foreign Exchange Management Act, 1999 as ‘AD Category - I bank' are permitted to become trading and clearing members of the currency futures market of the recognized stock exchanges, on their own account and on behalf of their clients, subject to fulfilling the minimum prudential requirements. (iii) AD Category - I banks which do not meet the above minimum prudential requirements and AD Category - I banks which are Urban Co-operative banks or State Co-operative banks can participate in the currency futures market only as clients, subject to approval therefore from the respective regulatory Departments of the Reserve Bank. Position limits i. The position limits for various classes of participants in the currency futures market shall be subject to the guidelines issued by the SEBI. ii. The AD Category - I banks, shall operate within prudential limits, such as Net Open Position (NOP) and Aggregate Gap (AG) limits. The exposure of the banks, on their own account, in the currency futures market shall form part of their NOP and AG limits. Risk Management measures The trading of currency futures shall be subject to mainta....
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....xpiry of the contracts. Membership i) Members registered with the SEBI for trading in currency futures market shall be eligible to trade in the exchange traded currency options market of a recognised stock exchange. Membership for both trading and clearing, in the exchange traded currency options market shall be subject to the guidelines issued by the SEBI. ii) Banks authorized by the Reserve Bank under section 10 of the Foreign Exchange Management Act, 1999 as ‘AD Category - I bank' are permitted to website: www.fema.rbi.org.in 22 22 email: [email protected] become trading and clearing members of the exchange traded currency options market of the recognized stock exchanges, on their own account and on behalf of their clients, subject to fulfilling the following minimum prudential requirements: a) Minimum net worth of Rs. 500 crores. b) Minimum CRAR of 10 per cent. c) Net NPA should not exceed 3 per cent. d) Made net profit for last 3 years. The AD Category - I banks, which fulfil the prudential requirements, should lay down detailed guidelines with the approval of their Boards for trading and clearing of the ex....
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.... that the role of Authorized Dealer banks here is primarily to provide facilities for remitting foreign currency amounts towards margin requirements from time to time, subject to verification of the underlying exposure. In lieu of making a direct remittance towards payment obligations arising out of commodity derivative transactions entered into by customers with overseas counterparties, AD Category I banks may issue guarantees/standby letters of credit to cover these specific payment obligations related to commodity derivatives, subject to the conditions/guidelines in Annex XV. It is clarified that the term Board, wherever used refers to Board of Directors or the equivalent forum in case of partnership or proprietary firms. The facility is divided into following categories: I) Delegated Route a. Hedging of price risk on actual Import/Export of commodities Participants Users: Companies in India engaged in import and export of commodities Facilitators: AD Category I banks. Purpose: To hedge price risk of the imported/exported commodity Products: Standard exchange traded futures and options (purchases only) in international commodity....
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.... would require the user to submit a Board resolution certifying Board approved policies which define the overall framework within which derivatives activities should be conducted and the risks controlled. c) All other conditions and guidelines as per Annex XI (A & B) should be complied with. (ii) ATF (Aviation Turbine Fuel) Participants Users: Actual domestic users of ATF. Facilitators: AD Category I banks Purpose: To hedge economic exposures in respect of ATF based on domestic purchases. Products: Standard exchange traded futures and options (purchases only) in international commodity exchanges. If risk profile warrants contracts overseas. - may use OTC Operational Guidelines: website: www.fema.rbi.org.in 27 email: [email protected] a) AD Category I banks should ensure that permission for hedging ATF is granted only against firm orders. b) AD Category I banks should retain necessary documentary evidence. c) AD Category I banks would require the user to submit a Board resolution certifying Board approved policies which define the overall framework within which derivatives activities should be conducted and th....
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....website: www.fema.rbi.org.in 29 email: [email protected] III) Entities in Special Economic Zones (SEZ) Participants Users: Entities in Special Economic Zones (SEZ) Facilitators: AD Category I banks Purpose: To hedge price risk of the imported/exported commodity Products: Standard exchange traded futures and options (purchases only) in international commodity exchanges. If risk profile warrants - may use OTC contracts overseas. Operational Guidelines: AD banks may allow entities in the Special Economic Zones (SEZ) to undertake hedging transactions in the overseas commodity exchanges/markets to hedge their commodity prices on export/import, subject to the condition that such contract is entered into on a stand-alone basis. (The term "standalone" means the unit in SEZ is completely isolated from financial contacts with its parent or subsidiary in the mainland or within the SEZs as far as its import/export transactions are concerned.) NOTE: The detailed guidelines in respect of Delegated Route and Approval Route are given in the Annex XI and XII respectively. 7. Freight hedging Domestic oil refining companies and....
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....that the corporate has a Risk Management Policy, incorporating the above details at the time of permitting the transaction itself and as and when changes made therein. website: www.fema.rbi.org.in 31 email: [email protected] v) The underlying exposure for the users is detailed under (a) and (b) below: (a) For Domestic oil refining companies: (i) The freight hedging will be on the basis of underlying contracts i.e., import/export orders for crude oil/petroleum products. (ii) Additionally, domestic oil refining companies may hedge their freight risk on anticipated imports of crude oil on the basis of their past performance up to 50 per cent of the volume of actual imports of crude oil during the previous year or 50 per cent of the average volume of imports during the previous three financial years, whichever is higher. (iii) Contracts booked under the past performance facility will have to be regularized by production of underlying documents during the currency of the hedge. An undertaking may be obtained from the company to this effect. (b) For shipping companies: (i) The hedging will be on the basis of owned / control....
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....al guidelines of each of the users is detailed below: 1. Facilities for Foreign Institutional Investors (Fils) Purpose i) To hedge currency risk on the market value of entire investment in equity and/or debt in India as on a particular date. ii) To hedge Initial Public Offers (IPO) related transient capital flows under the Application Supported by Blocked Amount (ASBA) mechanism. Products Forward foreign exchange contracts with rupee as one of the currencies and foreign currency-INR options. Foreign Currency – INR swaps for IPO related flows. Operational Guidelines, Terms and Conditions a) The eligibility for cover may be determined on the basis of the declaration of the FII. b) AD Category I banks may undertake periodic reviews, at least at quarterly intervals, on the basis of market price movements, fresh inflows, amounts repatriated and other relevant parameters to ensure that the forward cover outstanding is supported by underlying exposures. c) If a hedge becomes naked in part or in full owing to contraction of the market value of the portfolio, for reasons other than sale of securities, email: fedcofmd@rbi.....
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....nge contracts with rupee as one of the currencies and foreign currency-INR options. Operational Guidelines, Terms and Conditions a) In respect of contracts to hedge exchange rate risk on the market value of investments made in India, contracts once cancelled are not eligible to be rebooked. The contracts may, however, be rolled over. b) In respect of proposed foreign direct investments, following conditions would apply: (i) Contracts to hedge exchange rate risk arising out of proposed investment in Indian companies may be allowed to be booked only after ensuring that the overseas entities have completed all the necessary formalities and obtained necessary approvals (wherever applicable) for the investment. (ii) The tenor of the contracts should not exceed six months at a time beyond which permission of the Reserve Bank would be required to continue with the contract. (iii) These contracts, if cancelled, shall not be eligible to be rebooked for the same inflows. (iv) Exchange gains, if any, on cancellation shall not be passed on to the overseas investor. 4. Facilities for Hedging Trade Exposures, invoiced in Indian Rupees i....
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....done through the correspondent bank's Vostro or the AD bank's Nostro accounts. The contracts, once cancelled, cannot be rebooked. The contracts may, however, be rolled over on or before maturity subject to maturity of the underlying exposure. On cancellation of the contracts, gains may be passed on to the customer subject to the customer providing a declaration that he is not going to rebook the contract or that the contract has been cancelled on account of cancellation of the underlying exposure. In case the underlying trade transaction is extended, rollover can be permitted once based on the extension of the underlying trade transaction for which suitable documentation is to be provided by the overseas bank and the same procedure followed as in case of the original contract. Model II Non-resident exporter / importer dealing directly with the AD bank in India • The overseas exporter / importer approaches the AD bank in India with a request for forward cover in respect of underlying transaction for which he furnishes appropriate documentation (scanned copies would be acceptable), on a pre-deal basis to enable the AD ban....
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....India. Products website: www.fema.rbi.org.in 39 email: [email protected] Forward foreign exchange contracts with rupee as one of the currencies, foreign currency-INR options and foreign currency-INR swaps. Operational Guidelines, Terms and Conditions • The foreign equity holder / overseas organisation or individual approaches the AD bank in India with a request for forward cover in respect of underlying transaction for which he needs to furnish appropriate documentation (scanned copies would be acceptable), on a pre-deal basis to enable the AD bank in India to satisfy itself that there is an underlying ECB transaction, and details of his overseas banker, address, etc. The following undertakings also need to be taken from the customer - о That the same underlying exposure has not been hedged with any other AD Category- I bank/s in India. о If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately. The amount and tenor of the hedge should not exceed that of the underlying transaction and should be in consonance with the extant regulations regarding tenor of paymen....
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.... applicable. 2. Hedging of Gold Prices Users - i. Banks authorised by the Reserve Bank to operate the Gold Deposit Scheme ii. Banks, which are allowed to enter into forward gold contracts in India in terms of the guidelines issued by the Department of Banking Operations website: www.fema.rbi.org.in 42 email: [email protected] and Development (including the positions arising out of inter-bank gold deals) Purpose - To hedge price risk of gold Products - Exchange-traded and over-the-counter hedging products available overseas. Operational Guidelines, Terms and Conditions a) While using products involving options, it may be ensured that there is no net receipt of premium, either direct or implied. b) Authorised banks are permitted to enter into forward contracts with their constituents (exporters of gold products, jewellery manufacturers, trading houses, etc.) in respect of the underlying sale, purchase and loan transactions in gold with them, subject to the conditions specified by the Reserve Bank in this regard. The tenor of such contracts should not exceed six months. 3. Hedging of Capital Users - Fo....
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....the currency futures market only as clients, subject to approval and directions from the respective regulatory Departments of the Reserve Bank. website: www.fema.rbi.org.in 44 email: [email protected] (d) The AD Category - I banks, shall operate within prudential limits, such as Net Open Position (NOP) and Aggregate Gap (AG) limits. The exposure of the banks, on their own account, in the currency futures market shall form part of their NOP and AG limits. 5. Participation in the exchange traded currency options market in India Please refer to Part-A Section I, paragraph 5. In continuation of the same: a) AD Category - I banks are permitted to become trading and clearing members of the exchange traded currency options market of the recognized stock exchanges, on their own account and on behalf of their clients, subject to fulfilling the following minimum prudential requirements: Ä°. ii. Minimum net worth of Rs. 500 crores. Minimum CRAR of 10 per cent. Net NPA should not exceed 3 per cent. iv. Made net profit for last 3 years. The AD Category - I banks, which fulfil the prudential requirements, should lay down....
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....itted. website: www.fema.rbi.org.in 46 email: [email protected] 46 5. Conversion of Rupees into Foreign Currencies Balances held in Rupee accounts of non-resident banks may be freely converted into foreign currency. All such transactions should be recorded in Form A2 and the corresponding debit to the account should be in form A3 under the relevant Returns. 6. Responsibilities of Paying and Receiving Banks In the case of credit to accounts the paying banker should ensure that all regulatory requirements are met and are correctly furnished in form A1/A2 as the case may be. 7. Refund of Rupee Remittances Requests for cancellation or refund of inward remittances may be complied with without reference to Reserve Bank after satisfying themselves that the refunds are not being made in cover of transactions of compensatory nature. 8. Overdrafts / Loans to Overseas Branches/ Correspondents (i) AD Category I banks may permit their overseas branches/ correspondents temporary overdrawals not exceeding Rs.500 lakhs in aggregate, for meeting normal business requirements. This limit applies to the amount outstanding against all ....
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.... overseas markets. NOTE : A. Funding of accounts of Non-resident banks - please refer to paragraph 3 of Part B. B. Form A2 need not be completed for sales in the inter-bank market, but all such transactions shall be reported to Reserve Bank in R Returns. website: www.fema.rbi.org.in 49 email: [email protected] 4. Foreign Currency Accounts/ Investments in Overseas Markets (i) Inflows into foreign currency accounts arise primarily from client-related transactions, swap deals, deposits, borrowings, etc. AD Category I banks may maintain balances in foreign currencies up to the levels approved by the Board. They are free to manage the surplus in these accounts through overnight placement and investments with their overseas branches/correspondents subject to adherence to the gap limits approved by the Reserve Bank. (ii) AD Category I banks are free to undertake investments in overseas markets up to the limits approved by their Board. Such investments may be made in overseas money market instruments and/or debt instruments issued by a foreign state with a residual maturity of less than one year and rated at least as AA (-) by Stan....
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....pondents abroad and also includes overseas borrowings in gold for funding domestic gold loans (cf. DBOD circular No. IBD.BC. 33/23.67.001/2005-06 dated September 5, 2005). If drawals in excess of the above limit are not adjusted within five days, a report, as per the format in Annex- VIII, should be submitted to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai 400001, within 15 days from the close of the month in which the limit was exceeded. Such a report is not necessary if arrangements exist for value dating. b) The funds so raised may be used for purposes other than lending in foreign currency to constituents in India and repaid without reference to the Reserve Bank. As an exception to this rule, AD Category I banks are permitted to use borrowed funds as also foreign currency funds received through swaps for granting foreign currency loans for export credit in terms of IECD Circular No 12/04.02.02/2002-03 dated January 31,2003. Any fresh borrowing above this limit shall be made only with the prior approval of the Reserve Bank. Applications for fresh ECBs should....
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.... corporate clients who meet the prescribed criteria have to be included in the report. The AD banks should submit this report based on bank's books and not based on corporate returns. v) Authorised Dealers Category I should forward details of option transactions (FCY-INR) undertaken on a weekly basis as per the format indicated in Annex VIII. v) AD Category-l banks have to report their total outstanding foreign currency borrowings under all categories as on the last Friday of every month as per the format in Annex-IX. The report should be received by the 10 th of the following month. vi) AD Category-l banks are required to submit a monthly report (as on the last Friday of every month) on the limits granted and utilized by their constituents under the facility of booking forward contracts on past performance basis, as per the website: www.fema.rbi.org.in email: [email protected] 53 format in Annex-X. The report may also be forwarded by e-mail so as to reach the Department by the 10th of the following month. vii) The Head/Principal Office of each AD Category-l banks should submit a statement in form BAL giving details of their h....
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....nly their branches in India. 2. Capital Capital refers to Tier I capital as per instructions issued by Reserve Bank of India (Department of Banking Operations and Development). 3. Calculation of the Net Open Position in a Single Currency The open position must first be measured separately for each foreign currency. The open position in a currency is the sum of (a) the net spot position, (b) the net forward position and (c) the net options position. a) Net Spot Position The net spot position is the difference between foreign currency assets and the liabilities in the balance sheet. This should include all accrued income/expenses. b) Net Forward Position This represents the net of all amounts to be received less all amounts to be paid in the future as a result of foreign exchange transactions which have been concluded. These transactions, which are recorded as off-balance sheet items in the bank's books, would include: ( i ) spot transactions which are not yet settled; (ii) forward transactions; website: www.fema.rbi.org.in 56 email: [email protected] (iii) guarantees and similar commitments denominated in foreign curre....
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....ount factors for arriving at the net present value may be computed on the basis of the current swap curve as appearing on page ICAP 1 and SWAQ of the REUTERS screen on a consistent basis( i.e. adopting a specified time at which the same is to be determined). The methodology to be adopted/ selection of the rate/cut-off time etc. are to be a part of respective bank's laid down policy guidelines by the Management. 5. Capital Requirement As prescribed by Reserve Bank from time to time. website: www.fema.rbi.org.in 58 58 email: [email protected] Annex II [see Part D, paragraph (i)] Reporting of Forex Turnover Data - FTD and GPB The guidelines and formats for preparation of the FTD and GPB reports are given below. AD Category-l banks may ensure that the reports are properly compiled on the basis of these guidelines: The data for a particular date has to reach us by the close of business of the following working day. FTD 1. SPOT - Cash and tom transactions are to be included under 'Spot' transactions. 2. SWAP Only foreign exchange swaps between authorised dealers category-I should be reported under swap transactions. Long....
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....PB Statement showing gaps, position and cash balances as on... Foreign Currency Balances (Cash Balance + All Investments) Net Open Exchange Position (Rs.) Of the above FCY/INR AGL maintained (In USD mio) IN USD MILLION O/B (+)/O/S (-) IN INR CRORE IN INR CRORE VaR maintained(In INR): FOREIGN CURRENCY MATURITY MISMATCH (IN USD MILLION) I month II months III months IV months V months VI months >VI months website: www.fema.rbi.org.in 61 email: [email protected] [see Part D,paragraph (ii)] Statement of Nostro/Vostro Balances for the month of Name & address of the Authorised Dealer Category-I bank........ Sr. No. Currency 1 USD 23456 EUR JPY GBP INR Other currencies (in US $ million) Annex III Net balance in Net balance Nostro Account Vostro Account. in Note: In case the variation in each item above (given at 1 to 5) exceeds 10% in a month, the reason may be given briefly, as a footnote. This statement should be addressed to The Director, Division of International Finance, Department of Economic Analysis and Policy, Reserve Bank of India, Central Office Building, 8th Floor....
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.... Million or equivalent shall be reported, in Part B j. Under amounts hedged in Part B report the cumulative total of the hedges booked during the financial year k. The amount of contracts booked during the previous year and outstanding shall not be included under the amount hedged and amount O/S in Part B. I. Only the cases where the bank has sanctioned some PP limits for the corporate shall be reported in Part B Please send the report in Excel format by email to '[email protected]' copy to '[email protected]' C. INR/FCY currency swaps based on Rupee Liability (above USD 25 million equivalent be reported) Note : Authorised dealers Category-I should consolidate the above data for the bank as a whole and forward a report in EXCEL format giving corporate-wise balances to the Chief General Manager, Foreign Exchange Department, Reserve Bank of India, Central Office, Forex Markets Division, Mumbai- 400 001. Annex VI [See Part A Section 1 paragraph 2(g)(ii)] Format of Declaration of amounts booked/cancelled under Past Performance facility [On letterhead of the Company] Date : To, (Name and address of the Bank) Dear Sir,....
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....ts USD-INR USD USD USD EUR-INR EUR EUR EUR JPY-INR JPY JPY JPY (Similarly for other currency pairs) Total Net Open Options Position (INR): The total net open options position can be arrived using the methodology prescribed in A. P. (DIR Series) Circular No. 92 dated April 4, 2003. III. Change in Portfolio Delta Report Change in USD-INR delta for a 0.25% change in spot ($-appreciation) in INR terms = website: www.fema.rbi.org.in 67 email: [email protected] Change in USD-INR delta for a 0.25% change in spot ($-depreciation) in INR terms = Similarly, Change in delta for a 0.25% change in spot (FCY appreciation & depreciation separately) in INR terms for other currency pairs, such as EUR-INR, JPY-INR etc. IV. Strike Concentration Report Maturity Buckets Strike Price 1 week 2 weeks 1 month 2 months 3 3 months months This report should be prepared for a range of 150 paise around current spot level. Cumulative positions to be given. All amounts in USD million. When the bank owns an option, the amount should be shown as positive. When the bank has sold an option, the amount should be shown as ....
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....sanctioned limits (2) during the month (1) Forward Fcy/ Cross Forward Fcy / INR Cross Forward Fcy / Cross Contract INR currency Contract option currency Contract INR currency option option option option option Notes: Number of customers availing past performance facility as on date of report: 1. The position of the bank as a whole shall be indicated. 2. Amounts in columns 2, 3, 4 and 5 should be cumulative positions over the year. Outstanding amounts at the end of each financial year shall be carried over and taken into account in the next year's limit and therefore shall be included while computing the eligible limits for the next year. website: www.fema.rbi.org.in 10 70 email: [email protected] [See Part A, Section I, paragraph 5 A (i)] Annex XI A. Hedging of Commodity Price Risk in the International Commodity Exchanges/ Markets 1. AD Category I banks can grant permission to companies to hedge the price risk in respect of any commodity (except gold, platinum and silver) in the international commodity exchanges/markets. Reserve Bank retains the right to withdra....
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....ore they start their hedging activity. 5. AD Banks may submit an annual report to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Central Office, Forex Markets Division, Amar Building, 5th Floor, Mumbai - 400 001 as on March 31 every year, within one month, giving the names of the corporates to whom they have granted permission for commodity hedging and the name of the commodity hedged. 6. Applications from customers to undertake hedge transactions not covered under the delegated authority may continue to be forwarded to the Reserve Bank by the Authorised Dealers Category I, for approval. Conditions/ Guidelines for undertaking hedging transactions in the international commodity exchanges/ markets 1. The focus of hedge transactions shall be on risk containment. Only off-set hedge is permitted. website: www.fema.rbi.org.in 72 email: [email protected] 2. All standard exchange traded futures and options (purchases only) are permitted. If the risk profile warrants, the corporate/firm may also use OTC contracts. It is also open to the Corporate/firm to use combinations of option strategies involving a ....
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....ntained; sanction of the company's Board has been obtained for the specific activity and also for dealing in OTC markets; the Board approval must include explicitly the mark-to-market policy, the counterparties permitted for OTC derivatives, etc.; and domestic crude oil companies should have put up the list of OTC transactions to the Board on a half yearly basis, which must be evidenced by the AD Category I bank before permitting continuation of hedging facilities under this scheme. 3. The AD Category I banks should also ensure “user appropriateness†and “suitability†of the hedging products used by the customer as laid down in Para 8.3 of 'Comprehensive Guidelines on Derivatives' issued vide our circular.No.BP.BC. 44 /21.04.157/2011-12 dated November 2, 2011. website: www.fema.rbi.org.in 74 email: [email protected] Annex XII Approval Route Residents in India, engaged in import and export trade or as otherwise approved by Reserve Bank from time to time, may hedge the price risk of all commodities in the international commodity exchanges/markets. Applications for commodity hedging of companies/ firms ....
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....ema.rbi.org.in 76 16 email: [email protected] Annex XIII [see Part D, paragraph (x)] Statement - Details of Forward contracts booked and cancelled For the Quarter ended - Annex XIV (USD million) Forward Contracts Category Booked Forward Contracts Cancelled During the Quarter Cumulative total -Year to Date During the Cumulative Quarter total - Year to date SMEs Individuals Name of the AD Category - I bank: Signature of the Authorised official : Date: Stamp : website: www.fema.rbi.org.in 77 17 email: [email protected] Annex XV [A. P. (DIR Series) Circular No. 15, dated October 29, 2007] [see Part A, Section I, para 1 (iv)(d)] Application cum Declaration for booking of forward contracts up to USD 100,000 by Resident Individuals (To be completed by the applicant) I. Details of the applicant a. Name b. Address.. c. Account No.. d. PAN No.. II. Details of the foreign exchange forward contracts required 1. Amount (Specify currency pair) 2. Tenor III. Notional value of forward contracts outstanding as on date IV. Details of actual / antic....
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....pecific counterparty during the previous financial year. 5. The standby letter of credit / bank guarantee may be issued for a maximum period of one year, after marking a lien on the non-funded facility available to the customer (letter of credit / bank guarantee limit). 6. The bank shall ensure that the guidelines for overseas commodity hedging have been duly complied with. 7. The bank shall ensure that broker's month-end reports duly confirmed /countersigned by corporate's financial controller have been submitted. 8. Brokers' month end reports shall be regularly verified by the bank to ensure that all off- shore positions are / were backed by physical exposures. website: www.fema.rbi.org.in 79 12 email: [email protected] Annex XVIII Conditions for allowing users to enter into a combination of OTC option strategies involving a simultaneous purchase and sale of options for overseas Commodity hedging Users Listed companies and their subsidiaries/joint ventures/associates having common treasury and consolidated balance sheet or unlisted companies with a minimum net worth of Rs. 200 crore provided a. All such produc....
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....t in the Non-resident exporter's/ importer's country We confirm that all the information furnished above is true and accurate as provided by the overseas remitting bank of the non-resident exporter/importer. (Signature of the Authorised Official of the AD bank) Date: Stamp : Place: website: www.fema.rbi.org.in 81 email: [email protected] Annex XIX Reporting of Derivative transactions undertaken by non-resident importer/_exporter for the quarter ended Name of the AD Category I Bank – No. of non-resident importers / exporters availing the facility. Importers Exporters Total amount of derivative transactions undertaken (INR crores) FCY-INR options Forwards website: www.fema.rbi.org.in 82 62 email: [email protected] Annex XX Reporting of suspicious transactions undertaken by non-resident importer / exporter for the quarter ended Name of the AD Category I Bank – SI Name of the non- No resident exporter / importer Name of the overseas bank (in case of Model I) website: www.fema.rbi.org.in No. of derivative transactions cancelled along with cancellat....