**Policy Summary: RBI/2017-18/151**
**DBR.No.BP.BC.10321/04.157/2017-18**
**Date:** April 6, 2018
**Subject:** Modifications to Comprehensive Guidelines on Derivatives
**Addressed To:** Chairman and Managing Directors/Chief Executive Officers of All Scheduled Commercial Banks (excluding RRBs and LABs), All India Term-Lending Refinancing Institutions, and Primary Dealers.
**Summary:** This circular modifies the existing guidelines on derivatives, specifically referencing para 8.3 of circular DBOD No.BP.BC.44/21.04.157/2011-12 dated November 2, 2011. The key change is that stand-alone plain vanilla forex options (without attached structures) purchased by clients are now exempt from user suitability and appropriateness norms. Consequently, the regulatory requirements for these instruments will be aligned with those applicable to forex forward contracts.
**Contact:** Saurav Sinha, Chief General Manager-in-Charge, Department of Banking Regulation, Central Office, 12th/13th Floor, Central Office Bhavan, Shahid Bhagat Singh Marg, Mumbai – 400001. Tel No: 22661602, 22601000. Fax No: 022-2270 5670, 2260 5671, 2270 5691, 2260 5692.
Key Entities Referenced
Reserve Bank of India: The central bank of India, often referred to as RBI.
All Scheduled Commercial Banks: Refers to all commercial banks in India that are listed in the Second Schedule of the Reserve Bank of India Act, 1934, excluding Regional Rural Banks (RRBs) and Local Area Banks (LABs).
All India Term-Lending Refinancing Institutions: Financial institutions in India that provide long-term loans and refinancing facilities.
Primary Dealers: Entities authorized by the Reserve Bank of India to underwrite and trade in government securities.
DBOD No.BP.BC.44/21.04.157/2011-12: A circular issued by the Department of Banking Operations and Development (DBOD) of the Reserve Bank of India (RBI).
Derivatives: A financial instrument whose value is derived from an underlying asset or group of assets.
forex forward contracts: An agreement to exchange one currency for another at a specified future date and exchange rate.
Mumbai, Maharashtra: The city in which the central office of Department of Banking Regulation, Central Office is located.
RBI/2017-18/151
DBR.No.BP.BC.103/21.04.157/2017-18 April 6, 2018
The Chairman and Managing Directors/ Chief Executive Officers of
All Scheduled Commercial Banks (excluding RRBs and LABs),
All India Term-Lending & Refinancing Institutions &
Primary Dealers
Dear Sir,
Comprehensive Guidelines on Derivatives: Modifications
Please refer to para 8.3 of the circular DBOD No.BP.BC.44/21.04.157/2011-12 dated
November 2, 2011, in terms of which ‘user suitability and appropriateness’ are
applicable to all generic and structured derivative products except forex forward
contracts.
2. The instructions have been reviewed, and it has now been decided that stand-
alone plain vanilla forex options (without attached structures) purchased by clients
will be exempt from the ‘user suitability and appropriateness’ norms, and the
regulatory requirements will be at par with forex forward contracts.
Yours faithfully
(Saurav Sinha)
Chief General Manager-in Charge
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टेल�फोन /Tel No: 22661602, 22601000 फैक्स/Fax No: 022-2270 5670, 2260 5671, 5691 2270, 2260 5692
Department of Banking Regulation, Central Office, 12th & 13th Floor, Central Office Bhavan, Shahid Bhagat Singh Marg, Mumbai –
400001 Tel No: 22661602, 22601000 Fax No: 022-2270 5670, 2260 5671, 5691 2270, 2260 5692