TaxTMI 
TaxTMI 
TaxTMI 
Master Circular on Risk Management and Inter-Bank Dealings
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....RISK MANAGEMENT SECTION I 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-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 produc....
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....) 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 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. i) Forward foreign exchange contracts covering such transactions will be settled in cash on maturity. ii) These contracts once cancelled, are not eligible to be rebooked. iii) 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....
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....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 (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 a) To hedge exchange rate risk arising out of trade transactions. b) To hedge the contingent foreign exchange exposure arising out of submission of a tender bid in foreign exchange. Operational Guidelines, Terms and Conditions a) AD Category I banks can only offer plain vanilla European options.1 b) Customers can buy call or put options. c) These transactions may be freely booked and/ or cancelled subject to verification of the underlying. d) All guidelines applicable for cross currency forward contracts are applicable to cross currency option contracts also. e) 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 internation....
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....anks may quote the option premium in Rupees or as 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....
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.... than unity is attached to the benchmark rate(s), which alters the payables or receivables vis-à-vis the situation in the absence of such a factor. e) The notional principal amount of the swap should not exceed the outstanding amount of the underlying loan. f) The maturity of the swap should not exceed the remaining maturity of the underlying loan. 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 Rs. 200 crore provided a. All such products are fair valued on each reporting date; b. 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; c. Disclosures are made in the financ....
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....t (Borrowing and Lending in Foreign Exchange) Regulations, 2000. Purpose For hedging interest rate risk and currency risk on loan exposure and unwinding from such hedges. Operational Guidelines, Terms and Conditions a) The products, as detailed above should not involve the rupee under any circumstances. b) Final approval has been accorded or Loan Registration Number allotted by the Reserve Bank for borrowing in foreign currency. c) The notional principal amount of the product should not exceed the outstanding amount of the foreign currency loan. d) The maturity of the product should not exceed the unexpired maturity of the underlying loan. e) 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 ....
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....t performance facility only after satisfying themselves that the following conditions are complied with: i. An undertaking may be taken from the customer that supporting documentary evidence will be produced before the maturity of all the contracts booked. ii. Importers and exporters should furnish a quarterly declaration to the AD Category I banks, signed by the Chief Financial 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 utiliz....
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....enditure. b) AD Category I bank should carry out due diligence regarding "user appropriateness" and "suitability" of the forward contracts to the SME customers as per Para 8.3 of 'Comprehensive Guidelines on Derivatives' issued vide DBOD.No.BP.BC. 44 /21.04.157/2011-12 dated November 2, 2011. c) The SMEs availing this facility should furnish a declaration to the AD Category I bank regarding the 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. website: Product Forward foreign exchange contracts Operational Guidelines, Terms and Conditions a) 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 unde....
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....icate from the statutory auditors to the effect that the contracts outstanding with all AD category I banks at any time during the year did not exceed the value of the underlying exposures at that time. It is reiterated, however, that that the AD bank, while entering into any derivative transaction with a client, shall have to obtain an undertaking from the client to the effect that the contracted exposure against which 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 ....
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.... to directions contained in the Currency Futures (Reserve Bank) website: Directions, 2008 [Notification No.FED.1/DG(SG)-2008 dated August 6, 2008] (Directions) and Notification No.FED. 2 / ED (HRK)-2009 dated January 19, 2010 issued by the Reserve Bank of India, which have been issued under Section 45W of the Reserve Bank of India Act, 1934. Currency futures are subject to following conditions: Permission (i) Currency futures are permitted 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 contrac....
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....ng Houses shall not deal in or otherwise undertake the business relating to currency futures unless they hold an authorization issued by the Reserve Bank under section 10(1) of the Foreign Exchange Management Act, 1999. 5. Currency Options on recognised Stock /New Exchanges In order to expand the existing menu of exchange traded hedging tools available to the residents and non residents, plain vanilla currency options contracts have been permitted to 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 Stand....
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....agement measures The trading of exchange traded currency options shall be subject to maintaining initial, extreme loss and calendar spread margins and the Clearing Corporations / Clearing Houses of the exchanges should ensure maintenance of such margins by the participants on the basis of the guidelines issued by the SEBI from time to time. Surveillance and disclosures The surveillance and disclosures of transactions, in the exchange traded currency options 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 milli....
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....Officer (COO) shall co-sign the undertaking along with the CFO or the senior most functionary responsible for company's finance and accounts. Based on such an undertaking, the trading member can book ETCD contracts beyond fifty per cent of the limit and up to limit mentioned in paragraph (i) above. iv. For all other participants having an underlying foreign currency exposure in respect of both current and capital account transactions as also exporters and importers 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. v. 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)....
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....ts -may use OTC contracts overseas. Operational Guidelines AD Category I banks satisfying certain minimum norms, and authorized by the Reserve Bank may grant permission to companies listed on a recognized stock exchange to hedge price risk on import/ export in respect of any commodity (except gold, silver, platinum) in the international commodity exchanges/ markets. The guidelines are given in Annex XI (A & B). b. Hedging of anticipated imports of crude oil Participants 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 cu....
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....h are linked to international prices. 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) The hedging will be allowed strictly on the basis of underlying contracts. b) AD Category I banks should retain necessary documentary evidence. c) All other conditions and guidelines as per Annex XI (A & B) should be complied with. d. Hedging of 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:....
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....Users: Domestic oil-refining companies and shipping companies. Facilitators: AD Category I banks, specifically authorized by the Reserve Bank i.e. those who have been delegated the authority to grant permission to listed companies to hedge commodity price risk in the international commodity exchanges / markets, subject to the conditions mentioned therein. Purpose: To hedge freight risk. Products: Plain vanilla Over the Counter (OTC) or exchange traded products in the international market / exchange. Operational Guidelines: The maximum tenor permissible will be one year forward. i) The exchanges on which the products are purchased must be a regulated entity in the host country. ii) 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 / ....
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.... in the international market / exchange. Operational Guidelines a) The maximum tenor permissible will be one year forward. b) The exchanges on which the products are purchased must be a regulated entity in the host country. c) 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 their AD Category I bank concerned along with the latter's specific recommendations. SECTION II Facilities for Persons Resident outside India Participants Market-makers - AD Category I banks. Users -Foreign Portfolio Investors(FPIs), Investors having Foreign Direct Investments (FDI), Non Resident Indians (NRIs), Non Resident exporters and importers, Non Residents lenders having ECBs designated in INR. The purpose, products and operational guidelines of each of the users is detailed below: 1. Facilities for Foreign Portfolio Investors (FPIs) 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 securi....
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....t will be required to produce a clear mandate from the sub-account holder in respect of the latter's intention to enter into the derivative transaction. Further, the AD Category I banks shall have to verify the mandate as well as the eligibility of the contract vis-a-vis the market value of the securities held in the concerned sub-account. 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, the hedge may be allowed to continue till the original maturity, if so desired. d) Forward contracts booked by FPIs, 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 incident....
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....FPIs can take position - both long( bought) as well as short(sold) - in USD-INR pair upto USD 15 million per exchange. In addition, they 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. For the convenience of monitoring, exchanges may prescribe fixed limits for the contracts in currencies other than USD such that these limits are within the equivalent of USD 5 million. These limits shall be monitored by the exchanges and breaches, if any, may be reported to Financial Markets Regulation Department, Reserve Bank of India. d. 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. e. 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 tradin....
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....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. 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 Co....
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....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 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 ba....
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....ng 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 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 correspondent bank's Vostro or the AD bank's Nostro accounts. AD banks in India may release funds to the beneficiaries only after sighting funds in Nostro / Vostro 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. II) Purpose: To hedge t....
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....isks of foreign exchange asset-liability portfolio Products - Interest Rate Swap, Interest Rate Cap/Collar, Currency Swap, Forward Rate Agreement. AD banks may also purchase call or put options to hedge their cross currency proprietary trading positions. Operational Guidelines, Terms and Conditions The use of these instruments is subject to the following conditions: a) An appropriate policy in this regard is approved by the Top Management. b) The value and maturity of the hedge should not exceed those of the underlying. c) 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. d) 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 - 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 ....
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....lling the following minimum prudential requirements: i) Minimum net worth of Rs. 500 crores. ii) Minimum CRAR of 10 per cent. iii) Net NPA should not exceed 3 per cent. iv) Net profit for last 3 years. The AD Category - I banks which fulfill the prudential requirements should lay down detailed guidelines with the approval of their Boards for trading and 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....
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....prior reference to the Reserve Bank. Opening of Rupee accounts in the names of branches of Pakistani banks operating outside Pakistan requires specific approval of the Reserve Bank. 3. Funding of Accounts of Non-resident Banks (i) AD Category I banks may freely purchase foreign currency from their overseas correspondents/branches at on-going market rates to lay 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....
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....he provisions of paragraphs 1 and 2, AD Category I banks may freely undertake foreign exchange transactions as under: a) With AD Category I banks in India: (i) Buying/Selling/Swapping foreign currency against Rupees or another foreign currency. (ii) Placing/Accepting deposits and Borrowing/Lending in foreign currency. b). With banks 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 account....
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....l / Multilateral Financial Institutions [see (e) below] or any other entity as permitted by Reserve Bank of India and overdrafts in nostro accounts (not adjusted within five days), shall not exceed 100 per cent of their unimpaired Tier I capital or USD 10 million (or its equivalent), whichever is higher subject to conditions laid down in (f) below. The aforesaid limit applies to 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 Chief General Manager, Reserve Bank of India, Financial Markets Regulation Department 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 re....
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....turity of three years. (iv) All other existing norms (FEMA regulations, NOPL norms, etc) shall continue to be applicable. PART D REPORTS TO THE RESERVE BANK i) The Head/Principal Office of each AD Category-I banks should submit daily statements of Foreign Exchange Turnover in Form FTD and Gaps, Position and Cash Balances in Form GPB through the Online Returns Filing System (ORFS) as per format given in Annex-II. ii) The Head/Principal Office of each authorised dealer category-I should forward a statement of Nostro / Vostro Account balances on a monthly basis in the format given in Annex-III to the Director, Division of International Finance, Department of Economic 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. The report may also be forwarded by e-mail to [email protected] so as to reach the Department by the 10th ....
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....e format in Annex XIII. The report may also be forwarded by e-mail to [email protected] so as to reach the Department by the 10th of the following month. ix) The Head/Principal Office of each AD Category-I banks should furnish an up-to-date list (in triplicate) of all its offices/branches, which are maintaining Rupee accounts of non-resident banks as at the end of December every year giving their code numbers allotted by Reserve Bank. The list should be submitted before 15th January of the following year. The offices/branches should be classified according to area of jurisdiction of Reserve Bank Offices within which they are situated. The report may also be forwarded by e-mail to [email protected] so as to reach the Department by the 10th of the following month. x) AD Category - I banks are required to submit a quarterly report on the forward contracts booked & cancelled by SMEs and Resident Individuals, Firms and Companies within the first week of the following month, as per format given in Annex XIV. The report may also be forwarded by e-mail to [email protected] so as to reach the Department by the 10th of the following month. xi) Authorised Dealers should consolidate the dat....
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....d 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; iii) Guarantees and similar commitments denominated in foreign currencies which are certain to be called; iv) Net future income/expenses not yet accrued but already fully hedged (at the discretion of the reporting bank); v) Net of amounts to be received/paid in respect of currency futures, and the principal on currency futures/swaps. c) Net Options Position The options position is the "delta-equivalent" spot currency position as reflected in the authorized dealer's options risk management system, and includes any delta hedges in place which have not already been included under 1(a) or 1(b) (i) and (ii) above. 2. Calculation of the Overall Net Open Position This involves measurement of risks inherent in a bank's mix of long and short position in different cu....
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....he NOOP as prescribed in the guidelines for verification by Reserve Bank. iii. Transactions undertaken by Authorized Dealers till the end of business day may be computed for calculation of Foreign Exchange Exposure Limits. The transactions undertaken after the end of business day may be taken into the positions for the next day. The end of day time may be approved by the bank's Board. ii. Limit for positions involving Rupee as one of the currencies (NOP-INR) for exchange rate management a. NOP-INR may be prescribed to Authorised Dealers at the discretion of the Reserve Bank of India depending on the market conditions. b. The NOP-INR positions may be calculated by netting off the long & short onshore positions (as arrived at by the short hand method) plus the net INR positions of offshore branches. c. Positions undertaken by banks in currency futures / options traded in exchanges will form part of the NOP-INR. d. As regards option position, any excesses on account of large option Greeks during volatile market closing / revaluations may be treated as technical breaches. However, such breaches are to be monitored by the banks with proper audit trail. Such breaches should also b....
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....should be included in the sale side. 5. Transactions with RBI should be included in inter-bank transactions. Transactions with financial institutions other than banks authorised to deal in foreign exchange should be included under merchant transactions. GPB 1. Foreign Currency Balances - Cash balances and investments in all foreign currencies should be converted into US dollars and reported under this head. 2. Net open exchange position- This should indicate the overall overnight net open exchange position of the authorised dealer category-I in Rs. Crore. The net overnight open position should be calculated on the basis of the instructions given in Annex I. 3. Of the above FCY/INR- The amount to be reported is the position against the Rupee- i.e. the net overnight open exchange position less cross currency position, if any. Formats of FTD and GPB Statements FTD Statement showing daily turnover of foreign exchange dated......... Merchant Inter bank Spot, Cash, Ready, T.T. etc. Forwards Cancellation of Forwards Spot Swap Forwards FCY/INR Purchase from Sales to ....
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....n 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 contracts cancelled with all ADs from April till date _______ Amount of contracts o/s with all ADs as on date Amount utilised (by delivery of documents) as on date Available limits under past performance as on date Thanking you, Yours faithfully, For XXXXXX (Chief Financial Officer) (Company Secretary....
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.... 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 ($-appreciation) in INR terms = Change in USD-INR delta for a 0.25% change in spot ($-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 &nbs....
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.... Cross currency option Forward Contract Fcy/INR option Cross currency option Number of customers availing past performance facility as on date of report : - Notes: 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. Annex XI [See Part A, Section I, paragraph 5 A (i)] 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 withdraw the permission granted to any bank, if considered necessary. 2. Before permitting corporates to undertake hedge transactions, authorized dealer would require them to submit a Board resolution indicating (....
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....me 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. 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 simultaneous purchase and sale of options as long as there is no net inflow of premium direct or implied, subject to the guidelines detailed in Annex XVII. Corporates/firms are allowed to cancel an option position with an opposite transaction with the same broker. 3. The corporate/firm should open a Special Account with the Authorised Dealer Category-I bank. All payments/receipts incidental to hedging may be effected by the Authorised Dealer Category-I through this account without further refere....
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....hensive Guidelines on Derivatives' issued vide our circular No.BP.BC. 44 /21.04.157/2011-12 dated November 2, 2011. 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 which are not covered by the delegated authority of Authorised Dealers Category I may be forwarded to the Reserve Bank for consideration through the International Banking Division of an AD bank along with specific recommendation giving the following details: 1. A brief description of the hedging strategy proposed, namely: description of business activity and nature of risk, instruments proposed to be used for hedging, names of commodity exchanges and brokers through whom risk is proposed to be hedged and 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. ....
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.... A.P. (DIR Series) Circular No. 119, dated April 7, 2014] [see Part A, Section I, para 1(iv)(d)] Application cum Declaration for booking of forward contracts up to USD 250,000 by Resident Individuals, Firms and Companies (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 / anticipated remittances 1. Amount : 2. Remittance Schedule : 3. Purpose : Declaration I, ................... ............(Name of the applicant), hereby declare that the total amount of foreign exchange forward contracts booked with the --------------- (designated branch) of ------------------(bank) in India is within the limit of USD 250,000/- (US Dollar Two lakh and Fifty Thousand only) and certify that the forward c....
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....ancial 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. Annex XVII 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 products are fair valued on each reporting date; b. 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; c. Disclosures are made in the financial statements as prescribed in ICAI press release dated 2nd December 2005; and d. The companies have a risk management policy with a specific clause in the policy that allows u....
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....nbsp; Place: Stamp : 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. Total amount of derivative transactions undertaken (INR crores) Importers Exporters Forwards FCY-INR options Annex XX Reporting of suspicious transactions undertaken by non-resident importer / exporter - for the quarter ended . Name of the AD Category I Bank - Sl No Name of the non-resident exporter / importer Name of the overseas bank (in case of Model I) No. of derivative transactions cancelled along with cancellation of the underlying trade transaction and amount involved Action taken by the AD Cat I bank Appendix List of Circulars/Notifications which have been consolidated in the Master Circular on Risk Management and Inter-Bank Dealings Sr. No. Notification / Circular Date 1. Notification No. FEMA 25/2000-RB May 3, 2000 2. ....
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....8, 2007 22 A.P.(DIR Series) Circular No.52 May 08, 2007 23 A.P.(DIR Series) Circular No.66 May 31, 2007 24 A.P.(DIR Series) Circular No.76 June 19,2007 25 A.P.(DIR Series) Circular No.15 October 29 ,2007 26 A.P.(DIR Series) Circular No.17 November 6, 2007 27 A.P.(DIR Series) Circular No.47 June 3, 2008 28 A. P. (DIR Series) Circular No. 05 August 6, 2008 29 A.P.(DIR Series) Circular No.23 October 15, 2008 30 A. P. (DIR Series) Circular No.35 November 10, 2008 31 A.P.(DIR Series) Circular No.50 February 4, 2009 32 A.P.(DIR Series) Circular No.27 January 19, 2010 33 A.P.(DIR Series) Circular No.05 July 30, 2010 34 A.P.(DIR Series) Circular No.32 December 28, 2010 35 A.P.(DIR Series) Circular No.60 May 16, 2011 36 A.P.(DIR Series) Circular No.67 May 20, 2011 37 A.P.(DIR Series) Circular No.68 May 20, 2011 38 A.P.(DIR Series) Circular No.3 July 21, 2011 39 A.P.(DIR Series) Circular No.50 November 23, 2011 40 A.P.(DIR Series) Circular No.58 December 15, 2011 41 A.P.(DIR Series) Circular No.63 December 29, 2011 42 A.P.(DIR Series) Circular No.68 January 17, 2012 43 A.P.(DIR Series) Circular No.122 May 09, 2012 44 A.P.(DI....
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....of Banking Operations and Development). ============= Document 1 Annex V [see Part D, paragraph (iv)] Information relating to exposures in foreign currency as on Information relating to exposures Foreign Currency as on. Name of the bank. A. Exposures and Hedges based on Underlying Transactions (USD Million) Exports Trade Related Imports Short Term Finance Outstanding Non-Trade C INR/FCY currency Information relating to exposures in Foreign Currency as on. Name of the bank swaps based on B. Exposures and Hedges based on Past Performance (USD Million) Exports Imports Sr. No. Name of Corporate Exposures Amount hedged Exposures Amount hedged Exposures Amount hedged Exposures Amount hedged Eligible limits Cum. Amount hedged Amount O/S Eligible limits Cum. Amount hedged Amount O/S Rupee Liability above USD 25 million equivalent be reported) 1 2 3 4 5 Notes a. Export Bills purchased/discounted/negotiated not to be included b. L/Cs established/bills under LCs to be retired/ outstanding import collection bills to be included c. Data to be submitted based on banks' books and not based on corporate's return d. Short term Finance to include Trad....