TaxTMI 
TaxTMI 
Master Circular on Risk Management and Inter-Bank Dealings (Updated as on March 31, 2015)
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....AGEMENT SECTION I Facilities for Persons Resident in India other than Authorised Dealers Category-I SECTION II Facilities for Persons Resident outside India SECTION III Facilities for Authorised Dealers Category-I 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 PART - A RISK MANAGEMENT SECTION I Facilities for Persons Resident in India other than Authorised Dealers Category-I The facilities for persons resident in India (other than AD Category I banks) are elaborated under paragraphs A and B. Paragraph A describes the products and operational guidelines for the respective product. In addition to the operational guidelines under A, the general instructions that are applicable across all products for residents (other than AD Category I banks) are detailed under Paragraph B. A. Products and Operational Guidelines The product/purpose-wise facilities for persons resident in India (o....
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....omes 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 transactions denominated in foreign currency but settled in INR, including hedging the economic (currency indexed) exposure of importers in respect of customs duty payable on imports. * Forward foreign exchange contracts covering such transactions will be settled in cash on maturity. * These contracts once cancelled, are not eligible to be rebooked. * In the event of any change in the rate(s) of customs duties, due to Government notifications subsequent to the date of the forward contracts, importers may be allowed to cancel and/or rebook the contracts before maturity. Operational Guidelines, Terms and Conditions General principles to be observed for forward foreign exchange contracts. a) The maturity of the hedge should not exceed the maturity of the underlying transaction. The currency of hedge and tenor, subject to the above restrictions, are left t....
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....n has become necessary. The AD Category I bank may also verify the amount and tenor of the underlying substituted. ii) Cross Currency Options (not involving Rupee) Participants Market-makers - AD Category I banks as approved for this purpose by the Reserve Bank Users - Persons resident in India Purpose * To hedge exchange rate risk arising out of trade transactions. * To hedge the contingent foreign exchange exposure arising out of submission of a tender bid in foreign exchange. Operational Guidelines, Terms and Conditions * AD Category I banks can only offer plain vanilla European options. * Customers can buy call or put options. * These transactions may be freely booked and/ or cancelled subject to verification of the underlying. * All guidelines applicable for cross currency forward contracts are applicable to cross currency option contracts also. * Cross currency options should be written by AD Category I banks on a fully covered back-to-back basis. The cover transaction may be undertaken with a bank outside India, an Off-shore Banking Unit situated in a Special Economic Zone or an internationally recognized option exchange or another AD Category I bank in I....
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.... a percentage of the Rupee/foreign currency notional. g) Option contracts may be settled on maturity either by delivery on spot basis or by net cash settlement in Rupees on spot basis as specified in the contract. In case of unwinding of a transaction prior to the maturity, the contract may be cash settled based on market value of an identical off-setting option. h) Market makers are allowed to hedge the 'Delta' of their option portfolio by accessing the spot and forward markets. Other 'Greeks' may be hedged by entering into option transactions in the inter-bank market. i) The 'Delta' of the option contract would form part of the overnight open position. j) The 'Delta' equivalent as at the end of each maturity shall be taken into account for the purpose of AGL. The residual maturity (life) of each outstanding option contract can be taken as the basis for the purpose of grouping under various maturity buckets. k) AD banks running an option book are permitted to initiate plain vanilla cross currency option positions to cover risks arising out of market making in foreign currency-INR options. l) Banks should put in place necessary systems for marking to market the portfolio on a....
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....oan. v) Cost Reduction Structures i.e. cross currency option cost reduction structures and foreign currency -INR option cost reduction structures. Participants Market-makers - AD Category I banks 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 ₹ 200 crore provided * All such products are fair valued on each reporting date; * The companies follow the Accounting Standards notified under section 211 of the Companies Act, 1956 and other applicable Guidance of the Institute of Chartered Accountants of India (ICAI) for such products/ contracts as also the principle of prudence which requires recognition of expected losses and non-recognition of unrealized gains; * Disclosures are made in the financial statements as prescribed in ICAI press release dated 2nd December 2005; and * The companies have a risk management policy with a specific clause in the policy that allows using the type/s of cost reduction structures. (Note: The above accounting treatment is a transitional arrangement till AS 30 / 32 or equivalent standards are notified.)" Pu....
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....gistration Number allotted by the Reserve Bank for borrowing in foreign currency. * The notional principal amount of the product should not exceed the outstanding amount of the foreign currency loan. * The maturity of the product should not exceed the unexpired maturity of the underlying loan. * The contracts may be cancelled and rebooked freely. 2) Probable exposures based on past performance Participants Market-makers - AD Category I banks in India. Users - Importers and exporters of goods and services Purpose To hedge currency risk on the basis of a declaration of an exposure and based on past performance up to the average of the previous three financial years' (April to March) actual import/export turnover or the previous year's actual import/export turnover, whichever is higher. Probable exposure based on past performance can be hedged only in respect of trades in merchandise goods as well as services. Products Forward foreign exchange contracts, cross currency options (not involving the rupee), foreign currency-INR options and cost reduction structures [as mentioned in section B para I 1(v)]. Operational Guidelines, Terms and Conditions a) Corporates having a ....
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....inancial Officer (CFO) and the Company Secretary (CS), regarding amounts booked with other AD Category I banks under this facility, as per Annex VI. In the absence of a CS, the Chief Executive Officer (CEO) or the Chief Operating Officer (COO) shall co-sign the undertaking along with the CFO. iii. For an exporter customer to be eligible for this facility, the aggregate of overdue bills shall not exceed 10 per cent of the turnover. iv. Aggregate outstanding contracts in excess of 50 per cent of the eligible limit may be permitted by the AD Category I bank on being satisfied about the genuine requirements of their customers after examination of a document as per the format in Annex VII, signed by the CFO and CS, containing the following: * A declaration that all guidelines have been adhered to while utilizing this facility; and. * A certificate of import/export turnover of the customer during the past three years. In the absence of a CS, the CEO or the CFO shall co-sign the undertaking along with the CFO. h) The past performance limits once utilised are not to be reinstated either on cancellation or on maturity of the contracts. i) AD Category I banks must arrive at the past....
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....amounts of forward contracts already booked, if any, with other AD Category I banks under this facility. ii) Resident Individuals, Firms and Companies Participants Market-makers - AD Category I banks Users: Resident Individuals, Firms and Companies Purpose To hedge their foreign exchange exposures arising out of actual or anticipated remittances, both inward and outward, can book forward contracts, without production of underlying documents, up to a limit of USD 250,000, based on self declaration. Product Forward foreign exchange contracts Operational Guidelines, Terms and Conditions * The contracts booked under this facility would normally be on a deliverable basis. However, in case of mismatches in cash flows or other exigencies, the contracts booked under this facility may be allowed to be cancelled and re-booked. The notional value of the outstanding contracts should not exceed USD 250,000 at any time. * The contracts may be permitted to be booked up to tenors of one year only. * Such contracts may be booked through AD Category I banks with whom the resident individual has banking relationship, on the basis of an application-cum-declaration in the format given in....
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.... the derivative transaction is being booked has not been used for any derivative transaction with any other AD bank. c) Derived foreign exchange exposures are not permitted to be hedged. However, in case of INR- foreign currency swaps, at the inception, the user can enter into one time plain vanilla cross currency option (not involving Rupee) to cap the currency risk. d) In any derivative contract, the notional amount should not exceed the actual underlying exposure at any point in time. Similarly, the tenor of the derivative contracts should not exceed the tenor of the underlying exposure. The notional amount for the entire transaction over its complete tenor must be calculated and the underlying exposure being hedged must be commensurate with the notional amount of the derivative contract. e) Only one hedge transaction can be booked against a particular exposure/ part thereof for a given time period. f) The term sheet for the derivative transactions (except forward contracts) should also necessarily and clearly mention the following: * the purpose for the transaction detailing how the product and each of its components help the client in hedging; * the spot rate prevailin....
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....in US Dollar (USD) - Indian Rupee (INR), Euro (EUR)-INR, Japanese Yen (JPY)-INR and Pound Sterling (GBP)-INR. (ii) 'Persons resident in India' may purchase or sell currency futures contracts subject to the terms and conditions laid down in paragraph 6 below. (iii) Foreign Portfolio Investors (FPIs) are permitted to enter into currency futures contracts subject to the terms and conditions laid down in Part A, Section II, paragraph no. 2. Features of currency futures Standardized currency futures shall have the following features: a. USD-INR, EUR-INR, GBP-INR and JPY-INR contracts are allowed to be traded. b. The size of each contract shall be USD 1000 for USD-INR contracts, Euro 1000 for Euro-INR contracts, GBP 1000 for GBP-INR contracts and JPY 100,000 for JPY-INR contracts. c. The contracts shall be quoted and settled in Indian Rupees. d. The maturity of the contracts shall not exceed 12 months. e. The settlement price for USD-INR and Euro-INR contracts shall be the Reserve Bank's Reference Rates and for GBP-INR and JPY-INR contracts shall be the exchange rates published by the Reserve Bank in its press release on the last trading day. Membership (i) The membership of t....
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....o be traded in recognized stock exchanges or new exchanges, recognized by the Securities and Exchange Board of India (SEBI) in the country. Exchange traded Currency options are subject to following conditions: Permission (i) Exchange traded Currency option contracts are permitted in US Dollar (USD) - Indian Rupee (INR). (ii) 'Persons resident in India' may purchase or sell exchange traded currency options contracts subject to the terms and conditions laid down in paragraph 6 below. (iii) Foreign Portfolio Investors (FPIs) are permitted to enter into exchange traded currency options contracts subject to the terms and conditions laid down in Part A, Section II, paragraph no. 2. Features of exchange traded currency options Standardized exchange traded currency options shall have the following features: * The underlying for the currency option shall be US Dollar - Indian Rupee (USD-INR) spot rate. * The options shall be premium styled European call and put options. * The size of each contract shall be USD 1000. * The premium shall be quoted in Rupee terms. The outstanding position shall be in USD. * The maturity of the contracts shall not exceed twelve months. * The ....
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....s market, shall be carried out in accordance with the guidelines issued by the SEBI. Authorisation to the Exchanges / the Clearing Corporations for dealing in Currency Options Recognized stock exchanges and their respective Clearing Corporations / Clearing Houses shall not deal in or otherwise undertake the business relating to the exchange traded currency options unless they hold an authorisation issued by the Reserve Bank under section 10 (1) of the Foreign Exchange Management Act, 1999. 6. Terms and conditions for residents participating in the Exchange Traded Currency Derivatives (ETCD) a. Domestic participants shall be allowed to take a long (bought) as well as short (sold) position in USD-INR pair upto USD 15 million per exchange without having to establish the existence of any underlying exposure. In addition, domestic participants shall be allowed to take long as well as short positions in EUR-INR, GBP-INR and JPY-INR pairs, all put together, upto USD 5 million equivalent per exchange without having to establish the existence of any underlying exposure. For the convenience of monitoring, exchanges may prescribe fixed limits for the contracts in currencies other than USD....
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....ters who wish to access the ETCD market on the basis of contracted exposure, they will have to undertake the transaction through AD Category-I bank/s who are operating as trading members. In such cases, the responsibility for verification of the underlying exposures and ensuring that the ETCD bought/sold is in conformity with the underlying exposure and that no OTC contract has been booked against the same underlying exposure shall rest with the concerned (AD Category I bank) trading member. * All participants in the ETCD market, except those covered by paragraph (iv) above, will be required to submit to the concerned trading member of the exchange a half-yearly signed undertaking from the Chief Financial Officer (CFO) or the senior most functionary responsible for company's finance and accounts and the Company Secretary (CS) to the effect that the sum total of the outstanding OTC derivative contracts and outstanding ETCD contracts has been in correspondence with the eligible limits. In the absence of a CS, the Chief Executive Officer (CEO) or the Chief Operating Officer (COO) shall co-sign the undertaking along with the CFO or the senior most functionary responsible for comp....
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....ants Users: Domestic companies engaged in refining crude oil. Facilitators: AD Category I banks. Purpose: To hedge the price risk on crude oil imports on the basis of past performance. Products: Standard exchange traded futures and options (purchases only) in international commodity exchanges. If risk profile warrants - may use OTC contracts overseas. Operational Guidelines: a) Hedging to be permitted up to 50 per cent of the volume of actual imports during the previous year or 50 per cent of the average volume of imports during the previous three financial years, whichever is higher. b) Contracts booked under this facility will have to be regularized by production of supporting import orders during the currency of the hedge. An undertaking may be obtained from the companies to this effect. c) All other conditions and guidelines as per Annex XI should be complied with. c. Hedging of price risk on domestic purchase and sales (i) Select Metals Participants Users: Domestic producers/ users of aluminium, copper, lead, nickel and zinc listed on a recognized stock exchange. Facilitators: AD Category I banks Purpose: To hedge the price risk on aluminium, copper, lead, nickel....
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....f price risk on Inventory Participants Users: Domestic oil marketing and refining companies. Facilitators: AD Category I banks Purpose: To hedge commodity price risk on Inventory. Products: Over-the-counter (OTC) / exchange traded derivatives overseas with tenor restricted to a maximum of one-year forward. Operational Guidelines: a) Hedge is allowed to the extent of 50 per cent of their inventory based on the volumes in the quarter proceeding the previous quarter. b) All other conditions and guidelines as per Annex XI (A & B) should be complied with. II) Approval Route Participants Users: Residents in India, who are exposed to systemic international price risk in commodities. Facilitators: AD Category I banks Purpose: To hedge systemic international price risk in commodities. Products: Standard exchange traded futures and options (purchases only) in international commodity exchanges. If risk profile warrants - may use OTC contracts overseas. Operational Guidelines: Applications of companies/ firms which are not covered by the delegated authority of AD Category I may be forwarded to the Reserve Bank for consideration through the International Banking Division of an A....
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....exchange. Operational Guidelines: * The maximum tenor permissible will be one year forward. * The exchanges on which the products are purchased must be a regulated entity in the host country. * AD Category I banks should ensure that the entities hedging their freight exposures have Board Resolutions which certify that the Board approved Risk Management policies, defines the overall framework within which derivative transactions should be undertaken and the risks contained therein. AD Category I banks should approve this facility only after ensuring that the sanction of the company's Board has been obtained for the specific activity and also for dealing in overseas exchanges / markets. The Board approval must include explicitly the authority/ies permitted to undertake the transactions, the mark-to-market policy, the counterparties permitted for OTC derivatives, etc. and a list of transactions undertaken should be put up to the Board on a half-yearly basis. * The AD Category I bank must obtain a copy of a Board resolution that certifies that the corporate has a Risk Management Policy, incorporating the above details at the time of permitting the transaction itself and ....
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....TION II Facilities for Persons Resident outside India Participants Market-makers - AD Category I banks. Users - ,Foreign Institutional Investors(FII), Investors having Foreign Direct Investments (FDI), Non Resident Indians (NRIs), Non Resident exporters and importers, Non Residents lenders having ECBs designated in INR and Qualified Foreign Investors (QFIs). The purpose, products and operational guidelines of each of the users is detailed below: 1. Facilities for Foreign Institutional Investors (FIIs) 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 the coupon receipts arising out of investments in debt securities falling due during the following twelve months. iii) 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) FIIs may approach any AD Category I bank for hedging their curren....
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....es, the hedge may be allowed to continue till the original maturity, if so desired. d) Forward contracts booked by FIIs, once cancelled, can be rebooked up to the extent of 10 per cent of the value of the contracts cancelled. The forward contracts booked may, however, be rolled over on or before maturity. e) Forward contracts booked for hedging coupon receipts as indicated in para. (1)(ii) above shall not be eligible for rebooking on cancellation. They may however be rolled over on maturity provided the relative coupon amount is yet to be received. f) The cost of hedge should be met out of repatriable funds and /or inward remittance through normal banking channel. g) All outward remittances incidental to the hedge are net of applicable taxes. h) For IPO related transient capital flows * FIIs can undertake foreign currency- rupee swaps only for hedging the flows relating to the IPO under the ASBA mechanism. * The amount of the swap should not exceed the amount proposed to be invested in the IPO. * The tenor of the swap should not exceed 30 days. * The contracts, once cancelled, cannot be rebooked. Rollovers under this scheme will also not be permitted. h) FIIs and othe....
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.... shall be monitored by the exchanges and breaches, if any, may be reported to Financial Markets Regulation Department, Reserve Bank of India. * An FPI cannot take a short position beyond USD 15 million in USD-INR pair and USD 5 million in all other currency pairs put together at any time. In order to take a long position in excess of these limits in any exchange, it will be required to have an underlying exposure. The onus of ensuring the existence of an underlying exposure shall rest with the FPI concerned. * The exchange will, however, be free to impose additional restrictions as prescribed by the Securities and Exchange Board of India (SEBI) for the purpose of risk management and fair trading. * The exchange/ clearing corporation will provide FPI wise information on day-end open position as well as intra-day highest position to the respective custodian banks. The custodian banks will aggregate the position of each FPI on the exchanges as well as the OTC contracts booked with them (i.e. the custodian banks) and other AD banks. If the total value of the contracts exceeds the market value of the holdings on any day, the concerned FPI shall be liable to such penal action as ma....
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.... permission of the Reserve Bank would be required to continue with the contract. * These contracts, if cancelled, shall not be eligible to be rebooked for the same inflows. * Exchange gains, if any, on cancellation shall not be passed on to the overseas investor. 5. Facilities for Hedging Trade Exposures, invoiced in Indian Rupees in India Purpose To hedge the currency risk arising out of genuine trade transactions involving exports from and imports to India, invoiced in Indian Rupees, with AD Category I banks in India. Products Forward foreign exchange contracts with rupee as one of the currencies and foreign currency-INR options. Operational Guidelines, Terms and Conditions The AD Category I banks can opt for either Model I or Model II as given below: Model I Non-resident exporter / importer dealing through their overseas bank (including overseas branches of AD banks in India) * Non-resident exporter / importer approaches his banker overseas with appropriate documents with a request for hedging their Rupee exposure arising out of a confirmed import or export order invoiced in Rupees. * The overseas bank in turn approaches its correspondent in India (i.e. the AD b....
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....eptable), on a pre-deal basis to enable the AD bank in India to satisfy itself that there is an underlying trade transaction, and details of his overseas banker, address etc. The following undertakings also need to be taken from the customer * That the same underlying exposure has not been hedged with any other AD Category I bank/s in India. * If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately. * The AD bank may obtain certification of KYC/AML in the format in Annex XVIII. The format can be obtained through the overseas correspondent / bank through SWIFT authenticated message. In case the AD bank has a presence outside India, the AD may take care of the KYC/AML through its bank's offshore branch. * AD banks should evolve appropriate arrangements to mitigate credit risk. Credit limits can be granted based on the credit analysis done by self / the overseas branch. * 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 payment / realization of the proceeds. * On due date, settlement is to be done through the corresponden....
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.... * 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. 7. Facilities for Qualified Foreign Investors (QFIs) 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 * QFIs are allowed to hedge the currency risk on account of their permissible investments with the AD Category-I bank with whom they are maintaining the Rupee Account opened for the purpose of investment. * The eligibi....
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....ditions: * An appropriate policy in this regard is approved by the Top Management. * The value and maturity of the hedge should not exceed those of the underlying. * No 'stand alone' transactions can be initiated. If a hedge becomes naked, in part or full, owing to the contraction of the value of portfolio, it may be allowed to continue till the original maturity and should be marked to market at regular intervals. * The net cash flows arising out of these transactions are booked as income/ expenditure and reckoned toward foreign exchange position, wherever applicable. 2. Hedging of Gold Prices Users - * Banks authorised by the Reserve Bank to operate the Gold Deposit Scheme * Banks, which are allowed to enter into forward gold contracts in India in terms of the guidelines issued by the Department of Banking Operations 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 * While using products involving options, it may be ensured that there is no net receipt of premium, ei....
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....nd clearing of currency futures contracts and management of risks. (c). 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 and directions from the respective regulatory Departments of the Reserve Bank. (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. (e) AD Category-I banks may undertake proprietary trading in the ETCD market within their Net Open Position Limit (NOPL) and any limit that may be imposed by the exchanges for the purpose of risk management and preserving market integrity. (f) AD Category-I banks may also net / offset their positions in the ETCD market against the positions in the OTC derivatives markets. Keeping in view the volatility in the foreign exchange market, Reserve Bank may however stipulate a separate sub-limit of the NOPL (as a percentage thereof) ....
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....ay down funds in their accounts for meeting their bonafide needs in India. (ii) Transactions in the accounts should be closely monitored to ensure that overseas banks do not take a speculative view on the Rupee. Any such instances should be notified to the Reserve Bank. NOTE: Forward purchase or sale of foreign currencies against Rupees for funding is prohibited. Offer of two-way quotes in Rupees to non-resident banks is also prohibited. 4. Transfers from other Accounts Transfer of funds between the accounts of the same bank or different banks is freely permitted. 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 wi....
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....ks overseas and Off-shore Banking Units in Special Economic Zones (i) Buying/Selling/Swapping foreign currency against another foreign currency to cover client transactions or for adjustment of own position, (ii) Initiating trading positions in the 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. 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 instr....
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....o the aggregate amount availed of by all the offices and branches in India from all their branches/correspondents 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 Principal 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 th....
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....ic Analysis and Policy, Reserve Bank of India, Central Office Building, 8th Floor, Fort, Mumbai-400 001. The data may also be transmitted by fax or e-mail at the numbers/addresses given in the format. iii) AD Category-I banks should consolidate the data on cross currency derivative transactions undertaken by residents and submit half-yearly reports (June and December) as per the format indicated in the Annex-IV. iv) AD Category-I banks should forward details of exposures in foreign exchange as at the end of every quarter as per the format indicated in Annex-V. ADs should submit this report as per the revised format online only from quarter ended September 2013 through the Extensible Business Reporting Language (XBRL) system which may be accessed at https://secweb.rbi.org.in/orfsxbrl/. AD Category - I banks which require login ID / passwords for accessing XBRL system may submit their e-mail addresses and contact numbers to email. Please note that details of exposures of all 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 ....
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....underlying trade transactions by non-residents under the scheme as per the format indicated in the Annex XX. The reports are to be sent to the Principal Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Central Office, Forex Markets Division, 11th Floor, Mumbai - 400 001 unless otherwise specified. Annex I [See Part C, Paragraph 2] A. Guidelines for Foreign Exchange Exposure Limits of Authorised Dealers Category - I The Foreign Exchange Exposure Limits of Authorised Dealers would be dual in nature. * Net Overnight Open Position Limit (NOOPL) for calculation of capital charge on forex risk. * Limit for positions involving Rupee as one of the currencies (NOP-INR) for exchange rate management. For banks incorporated in India, the exposure limits fixed by the Board should be the aggregate for all branches including their overseas branches and Off-shore Banking Units. For foreign banks, the limits will cover only their branches in India. i. Net Overnight Open Position Limit (NOOPL) for calculation of capital charge on forex risk NOOPL may be fixed by the boards of the respective banks and communicated to the Reserve Bank immediately. However, such li....
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....rrive at the sum of all the net short positions. v. Arrive at the sum of all the net long positions. Overall net foreign exchange position is the higher of (iv) or (v). The overall net foreign exchange position arrived at as above must be kept within the limit approved by the bank's Board. Note: Authorised Dealer banks should report all derivative transactions including forward exchange contracts on the basis of PV adjustment for the purpose of calculation of the net open position. Authorised Dealer banks may select their own yield curve for the purpose of PV adjustments. The banks however should have an internal policy approved by its ALCO regarding the yield curve/(s) to be used and apply it on a consistent basis. 3. Offshore exposures For banks with overseas presence, the offshore exposures should be calculated on a standalone basis as per the above method and should not be netted with onshore exposures. The aggregate limit (on-shore + off-shore) may be termed Net Overnight open Position (NOOP) and will be subjected to capital charge. Accumulated surplus of foreign branches need not be reckoned for calculation of open position. An illustrative example is as follows: If a b....
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.... etc. in place of AGL and communicate the same to the Reserve Bank. The procedure and calculation of the limit should be clearly documented as an internal policy and strictly adhered to. 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-I 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 term swaps (both cross currency and foreign currency-Rupee swaps) should not be included in this report. Swap transactions should be reported only once and should not be included under either the 'spot' or 'forward' transactions. Buy/Sell swaps should be included in the 'Purchase' side under 'Swaps' while Sell/buy swaps should figure on the 'Sale' side. 3. Cancellation of forwards - The amount required to be repor....
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....rency Net balance in Nostro Account Net balance in Vostro Account. 1 USD 2 EUR 3 JPY 4 GBP 5 INR 6 Other currencies (in US $ million) 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, Mumbai- 400 001. Phone: 022- 2266 3791. Fax- 022 2262 2993, 2266 0792. Annex IV [see Part D, paragraph (iii)] Cross- currency derivative transactions - statement for the half-year ended…. Product No. of transactions Notional principal amount in USD Interest rate swaps Currency swaps Coupon swaps Foreign currency options Interest rate caps or collars (Purchases) Forward rate agreements Any other product as permitted by Reserve Bank from time to time Annex V [See Part D, paragraph (iv)] Information relating to exposures in foreign currency as on................... Information relating to exposures in Foreign Currency as on............................ Name of the bank............................
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....erformance facility [On letterhead of the Company] Date : To, (Name and address of the Bank) Dear Sir, Sub : Declaration of amounts booked/cancelled under Past Performance facility We refer to the facility of booking of Forward or Option Contracts involving Foreign Exchange, based on the past performance facility with Authorised Dealer Category I Banks (AD Category I Banks), more specifically in relation to the undertaking submitted by us to you, dated [ ] in this regard ("Undertaking"). In accordance with the said Undertaking, we hereby furnish a declaration regarding the amounts of the transactions booked by us with all AD Category I banks. We are availing the past performance limit with the following AD Category I banks : …………………………………. Please find below the information regarding amounts booked / cancelled with all AD Category I Banks under the said past performance facility as permitted under the FEMA Regulations : (Amount in US Dollar) Eligible limit under past performance Aggregate amount of contracts booked with all the ADs from April till date Amount of contra....
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....scribed 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 ($-appreciation) in INR terms = Change in USD-INR delta for a 0.25% change in spot ($-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 months > 3 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 negative. All reports may be sent via e-mail by market-makers. Reports may be prepared as of every Friday and sent by the following Monday. Annex IX [See Part C, paragraph 5 (a)] Overseas foreign currency borrowings -Report as on ……….. Amount (in equivalent USD* Million) Bank (SWIFT code) Unimpaired Tier-I capital as at the ....
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....ruments proposed to be used for hedging, * the names of the commodity exchanges and brokers through whom the risk is proposed to be hedged and the credit lines proposed to be availed. The name and address of the regulatory authority in the country concerned may also be given, * size / average tenure of exposure and/or total turnover in a year, together with expected peak positions thereof and the basis of calculation. along with a copy of the Board Risk Management Policy approved by its Management covering; * risk identification * risk measurements * guidelines and procedures to be followed with respect to revaluation and/or monitoring of positions * names and designations of officials authorized to undertake transactions and limits 4. Authorised Dealers may refuse to undertake any hedge transaction if it has a doubt about the bonafides of the transaction or the corporate is not exposed to price risk. The conditions subject to which ADs would grant permission to hedge and the guidelines for monitoring of the transactions are given below. It is clarified that hedging the price risk on domestic sale/purchase transactions in the international exchanges/markets, even if t....
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....firm should not undertake any arbitrage/speculative transactions. The responsibility of monitoring transactions in this regard will be that of the Authorised Dealer Category I. 7. An annual certificate from Statutory Auditors should be submitted by the company/firm to the Authorised Dealer Category I. The certificate should confirm that the prescribed terms and conditions have been complied with and that the corporate/firm's internal controls are satisfactory. These certificates may be kept on record for internal audit/inspection. B. Hedging of commodity price risk on petroleum & petroleum Products by domestic crude oil refining companies 1. The hedging has to be undertaken only through AD Category I banks, subject to conditions and guidelines as also given in (a) and (b) of this Annex. 2. While extending the above hedging facilities, AD Category I banks should ensure that the domestic crude oil refining companies hedging their exposures should comply with the following: * to have Board approved policies which define the overall framework within which derivatives activities are undertaken and the risks contained; * sanction of the company's Board has been obtained for t....
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....orward cover (without rebooking) outstanding Name of FII Current Market Value (USD Million) Eligibility for Forward cover Forward Contracts Booked Forward Contracts Cancelled Total forward cover outstanding During the month Cumulative Total - Year to Date During the month Cumulative total - Year to date Part B - Details of transactions permitted to be cancelled and rebooked Name of FII Market Value as determined at start of year (USD Million) Eligibility for Forward cover Forward Contracts Booked Forward Contracts Cancelled Total forward cover outstanding During the month Cumulative Total - Year to Date During the month Cumulative total - Year to date Name of the AD Category - I bank: Signature of the Authorised official: Date : Stamp : Annex XVI [A. P. (DIR Series) Circular No. 35, dated November 10, 2008] [see Part A, Section I, paragraph 5] Conditions / Guidelines for issuance of standby letter of credit /bank guarantee - commodity hedging transactions 1. AD Category I banks may issue guarantees/standby letters of credit only where the remittance is covered under the delegated authority or under the specific approval granted for overseas commodity h....
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....e accounting treatment is a transitional arrangement till AS 30 / 32 or equivalent standards are notified.)" Operational Guidelines, Terms and Conditions Writing of options by the users, on a standalone basis is not permitted. Users can however, write options as part of cost reduction structures, provided, there is no net receipt of premium. * Leveraged structures, Digital options, Barrier options and any other exotic products are not permitted. * The delta of the options should be explicitly indicated in the term sheet. * The portion of the structure with the largest notional should be reckoned for the purpose of underlying. * AD Category I banks may, stipulate additional safeguards, such as continuous profitability, etc. depending on the scale of operations and risk profile of the users. Annex XVIII Know Your Customer (KYC) Form in respect of the non-resident exporter/importer Registered Name of the non-resident exporter/importer (Name, if the non-resident exporter/importer is an Individual) Registration Number (Unique Identification Number* in case non-resident exporter/importer is an Individual) Registered Address (Permanent Address if non-resident exporter / imp....
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....tion No. FEMA 191/2009-RB May 20, 2009 17. Notification No. FEMA 201/2009-RB November 5, 2009 18. Notification No. FEMA 210/2010-RB July 19, 2010 19. Notification No. FEMA 226/2010-RB March 16, 2012 20. Notification No. FEMA 240/2010-RB September 25, 2012 21 Notification No. FEMA 286/2013-RB September 5, 2013 22 Notification No. FEMA 288/2013-RB September 26, 2013 23 Notification No. FEMA 303/2014-RB May 21, 2014 1. A.P (DIR Series) Circular No. 92 April 4, 2003 2. A.P (DIR Series) Circular No. 93 April 5, 2003 3. A.P (DIR Series) Circular No. 98 April 29, 2003 4. A.P (DIR Series) Circular No.108 June 21, 2003 5. A.P.(DIR Series) Circular No. 28 October 17, 2003 6. A.P.(DIR Series) Circular No. 46 December 9, 2003 7. A.P.(DIR Series) Circular No. 47 December 12, 2003 8. A.P.(DIR Series) Circular No. 81 March 24, 2004. 9. A.P.(DIR Series) Circular No 26 November 1, 2004 10. A.P.(DIR Series) Circular No 47 June 23, 2005 11. A.P.(DIR Series) Circular No 03 July 23, 2005 12. A.P.(DIR Series) Circular No 25 March 6, 2006 13. EC.CO.FMD. No.8/02.03.75/2002-03 February 4, 2003 14. EC.CO.FMD. No.14/02.03.75/2002-03 May 9, 2003 ....