Money & Banking
RBI to issue Rs5, Rs10 coins to commemorate 60 years of Parliament

On 13th May 1952, the two Houses of the Parliament held their first sessions, following the...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Financial Literacy: Lip service

Neither the regulators, nor the states want to touch the biggest scourge of savers across...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Banks can end derivative deals if client cut exposure says RBI

RBI in its 'prudential norms for off-balance Sheet Exposures of Banks' notification said, banks may partially or fully terminate the contract before maturity, at their discretion, thereby reducing the notional exposure of the contract

 

Mumbai: The Reserve Bank of India (RBI) said banks will have the discretion to terminate a derivative contract in case a client decides to reduce its exposure in such instrument pre-maturely, reports PTI.

However, such transaction would not be treated as restructuring of the derivative contract provided all other parameters of the original contract remain unchanged, RBI said in a notification.

So far, any change in any of the parameters of a derivative contract was treated as restructuring and the mark-to-market (MTM) value of the contract on the date of restructuring was settled in cash.

"There may be situations where the clients of banks may like to reduce the notional exposure of the hedging derivative contract.

"In such cases, banks may partially or fully terminate the contract before maturity, at their discretion, thereby reducing the notional exposure of the contract," RBI said in 'prudential norms for off-balance Sheet Exposures of Banks' notification.

Off-balance sheet deals include currency and interest rate derivatives, securitised loans and guarantees.

The notification further said, there may be cases, where the derivative contract has been terminated, either partially or fully, MTM has been permitted to be repaid in instalments but the client subsequently decides to hedge the same underlying exposure again by entering into new contract with same or other bank.

In such cases, banks may offer derivative contracts to the client provided the client has fully re-paid the entire outstanding instalments corresponding to the derivative contract that was used to hedge the underlying exposure previously, it added.
 

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)