November
5, 2015
Residents having
a long term foreign currency liability are permitted to hedge exchange rate
and/or interest rate risk exposure by undertaking a foreign currency-INR swap.
(i)
It
has been decided to permit residents to enter into FCY-INR swaps with
Multilateral or International Financial Institutions (MFI/IFI) which shall be on
a back-to-back basis with an AD Category-I bank in India.
(ii)
AD
Category-I banks shall face only those MFIs and IFIs in which Government of
India is a shareholding member.
(iii)
The
FCY-INR swaps shall have a minimum tenor of three years.
(iv)
In
the event of a default, the concerned MFI / IFI shall bring in foreign currency,
to meet its liabilities to the AD Cat-I bank in India.
(v)
AD-I
bank shall report the FCY-INR swaps transactions to CCIL reporting platform,
including details of the foreign currency borrower, on
the reporting platform for OTC Foreign
Exchange and Interest Rate Derivatives.
Based on RBI
Circular dt 05/11/15. Please visit www.rbi.org.in for any further clarification
if required….. Poppy
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