Reserve Bank of India (RBI) has issued a notification to all authorised dealer category –I (AD Cat-I) banks, stating that banks are invited to the Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020.
Accordingly, 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:
- Indian currency;
- Freely convertible foreign currency;
- Debt securities issued by Indian Central Government and State Governments;
- Rupee bonds issued by person 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 SEBI.
However, AD 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.
It further states, AD Cat-I banks may receive and pay interest on margin posted and collected on their own account or on behalf of above mentioned person.
As well as banks shall maintain a separate account in the name of person resident outside India for the purpose of posting and collecting cash margin in India, and transactions incidental thereto.