**Summary:**
This circular, A. P. DIR Series Circular No. 10, issued by the Reserve Bank of India (RBI) on February 15, 2021, addresses the margin requirements for derivative contracts between Indian residents and non-residents. It provides directions to Authorised Dealer Category-I (AD Cat-I) banks, allowing them to post and collect margin for permitted derivative contracts.
AD Cat-I banks are permitted to post and collect margin in India in the form of: Indian currency, freely convertible foreign currency, debt securities issued by the Indian Central Government and State Governments, and Rupee bonds issued by Indian residents that are listed on a recognized stock exchange in India and have a credit rating of AAA (or the lowest rating if multiple ratings exist from SEBI-registered agencies).
Margin can also be posted and collected outside India in the form of: freely convertible foreign currency and debt securities issued by foreign sovereigns with a credit rating of AA- or above (S&P Global Ratings, Fitch Ratings) or Aa3 or above (Moody's Investors Service), using the lowest rating if multiple ratings exist.
The circular also allows AD Cat-I banks to receive and pay interest on margin posted and collected for permitted derivative contracts, on their own account or on behalf of their customers. Banks are required to maintain a separate account in the name of non-residents for the purpose of posting and collecting cash margin in India and transactions incidental to it.
These directions are issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999, and are without prejudice to other applicable laws.
For further information, contact the Financial Markets Regulation Department, Central Office, Reserve Bank of India, 9th Floor, Central Office Building, Shahid Bhagat Singh Road, Fort, Mumbai 400 001. Tel: 91-22-2260 1000 Ext: 5080, 2270 2290. Fax: 91-22-22702290. Email: cgmfmrdrbi.org.in.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system and foreign exchange management.
Authorised Dealer Category-I Banks: Banks authorized by the Reserve Bank of India to deal in foreign exchange.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for matters connected therewith or incidental thereto.
Foreign Exchange Management Margin for Derivative Contracts Regulations, 2020: Regulations pertaining to margin requirements for derivative contracts, as notified by the Reserve Bank of India.
Securities and Exchange Board of India: The regulatory body for securities markets in India.
Mumbai, Maharashtra: The city in India where the Central Office of the Financial Markets Regulation Department of RBI is located.
SP Global Ratings: A credit rating agency.
Moody's Investors Service: A credit rating agency.
भारतीय �रज़वर् ब�क
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2020-21/98
A. P. (DIR Series) Circular No. 10 February 15, 2021
All Authorised Dealer Category-I Banks
Madam/Sir,
Margin for Derivative Contracts
Attention of Authorised Dealer Category-I (AD Cat-I) banks is invited to the Foreign
Exchange Management (Margin for Derivative Contracts) Regulations, 2020 notified in
the Gazette of India vide notification no. FEMA.399/RB-2020 dated October 23, 2020
(Annex I). Accordingly, directions are being issued to allow posting and collection of
margin for permitted derivative contracts between a person resident in India and a person
resident outside India.
2. AD Cat-I banks may post and collect margin in India, on their own account or on behalf
of their customers, for a permitted derivative contract entered into with a person resident
outside India in the form of:
(i) Indian currency;
(ii) Freely convertible foreign currency;
(iii) Debt securities issued by Indian Central Government and State Governments;
(iv) Rupee bonds issued by persons resident in India which are:
(a) Listed on a recognized stock exchange in India; and
(b) Assigned a credit rating of AAA issued by a rating agency registered with the
Securities and Exchange Board of India. If different ratings are accorded by
two or more credit rating agencies, then the lowest rating shall be reckoned.
Explanation: Permitted derivative contract shall have the same meaning as assigned to
it in the Foreign Exchange Management (Margin for Derivative Contracts) Regulations,
2020 [Notification no. FEMA.399/RB-2020 dated October 23, 2020].
िव�ीयबाज़ारिविनयमनिवभाग,क��ीयकायार्लय, 9वीमंिजल केन्�ीयकायार्लयभवन शहीदभगत�संहमाग,र् फोटर्,मुंबई
फोन ( 2260 1000 Ext: 5080,फैक्स 22702290, ईमेल
, , – 400 001
Financial Markets Re:g9ul1a-t2io2n) Department, Central Off ice, 9: t(h 9F1lo-2o2r,) Central Office -Buil:d cinggm, fSmhradh@idr Bbhi.aogrga.ti nSinghRoad, Fort,
Mumbai – 400 001
Tel: (91-22) 2260 1000 Ext: 5080, Fax: (91-22) 22702290, E-mail: cgmfmrd@rbi.org.in
िहन्दी आसान ह,ै इसका �योग
बढ़ाइए3. AD Cat-I banks may post and collect such margin outside India in the form of:
(i) Freely convertible foreign currency; and
(ii) Debt securities issued by foreign sovereigns with a credit rating of AA- and above
issued by S&P Global Ratings / Fitch Ratings or Aa3 and above issued by
Moody’s Investors Service. If different ratings are accorded by two or more credit
rating agencies, then the lowest rating shall be reckoned.
4. AD Cat-I banks may receive and pay interest on margin posted and collected on their
own account or on behalf of their customers for a permitted derivative contract entered
into with a person resident outside India.
5. AD Cat-I banks shall maintain a separate account in the name of persons resident
outside India for the purpose of posting and collecting cash margin in India, and
transactions incidental thereto.
6. The directions contained in this circular have been issued under Sections 10(4) and
11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without
prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
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