RBI Amends Norms On Reporting Foreign Exchange, Interest Rate Swap Derivatives Trades

The Reserve Bank of India updated regulations on reporting of trades related to over-the-counter foreign exchange derivative contracts and foreign currency interest rate derivative contracts to the trade repository of Clearing Corp. of India.

Inter-bank foreign exchange derivative contracts involving the rupee, except currency swaps and structured derivatives, should be reported in hourly batches within 30 minutes from the completion of the hour, according to a master circular issued by RBI on Friday.

Contracts executed 30 minutes before the CCIL's reporting platform closes must be reported by 10:00 a.m. the next business day.

Further, inter-bank foreign exchange derivative contracts in other currencies except the Indian rupee executed up to 5:00 p.m. must be reported by 5:30 p.m. the same day. Transactions executed after 5:00 p.m. must be reported by 10:00 a.m. the following business day, RBI said.

For inter-bank currency swaps, structured derivatives and foreign currency interest rate derivatives, transactions executed up to 5:00 p.m. should be reported before CCIL’s reporting platform closes for the day. The ones executed after 5:00 p.m. should be reported by 10:00 a.m. on next business day. Foreign exchange derivative contracts and foreign currency interest rate derivative contracts executed with clients should be reported before noon of the following business day, the central bank said.

Further, to improve transparency, trade details under the 'back-to-back' arrangement, including the particulars of the non-resident clients, should be reported to the trade repository.

Having said that, entities are not required to match transactions with overseas counterparts and client transactions in the trade repository, as the overseas counterparts and clients are not required to confirm the transaction details. Banks are responsible for ensuring the accuracy of transactions reported, the RBI said.

Furthermore, banks must continuously reconcile outstanding balances between their books and the trade repository.

Apart from Authorised Dealer Category-1, or banks, standalone primary dealers will be considered under Authorised Dealer Category-3 for the purpose of exchange-traded currency derivatives.

RBI defines AD Category-3 as select financial and other institutions who carry out specific foreign exchange transactions incidental to their business or activities.

The RBI also added a clause that standalone primary dealers can borrow in foreign currency from their parent or correspondent outside India or any other entity permitted by the central bank within the prescribed limit. They can avail of the of the overdraft facility in Nostro accounts only for operational reasons.

If borrowings exceed the limit and are not adjusted within five days, the primary dealers are required to submit a report to the RBI 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, the central bank said.

The authorised dealers, including banks as well as standalone primary dealers, are required to report details regarding the net overnight open position limit for the calculation of capital charge on forex risk, option transactions, and a list of offices or branches that are maintaining rupee accounts of non-resident banks to the RBI through the centralised information management system or e-mail.

They will now report details of daily statements of foreign exchange turnover, exposures in foreign exchange, total outstanding foreign currency borrowings under all categories, doubtful transactions involving frequent cancellation of hedge transactions, and/or the underlying trade transactions by non-residents to the RBI through the centralised information management system.

These directions come into effect immediately.