The Reserve Bank of India (RBI) vide its notification number RBI/2020-21/98 dated 15th February 2021 issued directions for allowing posting and collection of margins for permitted derivative contracts between a person resident in India and a person resident outside India.
The Authorized Dealer Cat-I banks may post and collect margin in India, on their own account or on behalf of their customers, for a permitted derivative contracts entered into with a person resident outside India in the form of:
- Indian currency
- Freely convertible foreign currency
- Debt securities issued by Indian Central Government and State Governments
- Rupee bonds issued by persons resident in India which are
- Listed on a recognized stock exchange in India; and
- 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.
And also, The Authorized Dealer Cat-I banks may post and collect such margin outside India in the form of:
- Freely convertible foreign currency; and
- 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.
Further, The Authorized Dealer 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 contracts entered into with a person resident outside India.
Accordingly, The Authorized Dealer 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.
Input: rbi.org.in