- The RBI released draft directions for new foreign exchange rules for authorised forex dealers
- The draft aims to provide flexibility and manage risks in inter-bank foreign exchange transactions
- Authorised dealers can lease and lend foreign currency to mitigate risks and manage balance sheets
The Reserve Bank of India has put out draft directions for the new foreign exchange rules regarding authorised forex dealers on Tuesday, with the body stating that the draft provides more flexibility to them, as per a press release.
The RBI's draft also aims to manage risks and exposures regarding inter-bank foreign exchange transactions and reducing mandates for reporting requirements. "Authorised persons shall mean authorised dealer category-I banks and standalone primary dealers authorised as authorised dealer category-III,” the draft said.
The draft facilitiates authorised dealers to lease and lend foreign currency to other dealers in order to mitigate risks, manage balance sheets, engage in market making and for proprietary positions, where a company uses its own capital to hold investments.
It also enumerates upon how authorised dealers can execute a variety of forex and derivative transactions, including those with forex branches and entities residing overseas, as per the regulatory rules set out in the draft. "The revised framework provides these authorised dealers with greater flexibility with respect to foreign exchange products, risk management and platforms," the draft said.
A day earlier, the RBI issued draft norms for banks to report foreign exchange derivative transactions involving rupee undertaken by their related parties globally, a move aimed at enabling better pricing decisions by market participants.
The Reserve Bank said it has been taking several measures to enhance transparency in the markets for over-the-counter foreign exchange, interest rate and credit derivatives.
As part of these measures, all transactions in OTC derivatives are reported to the trade repository of the Clearing Corporation of India Limited by market-makers.
(With PTI Inputs)
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