Reserve Bank of India issued a notification on April 30th, 2024, amending the Foreign Exchange Management (Margin for Derivatives Contracts) Regulations of 2020. The amendment, titled Foreign Exchange Management (Margin for Derivatives Contracts) (First Amendment) Regulations, 2024, introduces changes to Regulation 2 and Regulation 4 of the Principal Regulation.
Regulation 2 is amended to include credit derivative contracts undertaken in accordance with the Master Direction – Reserve Bank of India (Credit Derivatives) Directions, 2022. Regulation 4 now allows authorized dealers to post and collect margin, both in India and outside India, for permitted derivative contracts entered into with persons resident outside India. This includes receiving and paying interest on such margin.
Additionally, authorized dealers are permitted to post and collect margin for derivative transactions of their overseas branches and International Financial Services Centre Banking Units, with interest on such margin being received and paid both within and outside India.
Moreover, authorized dealers can now post and collect margin on behalf of their customers for permitted derivative contracts entered into with persons resident outside India, with the provision for receiving and paying interest on such margin.
RESERVE BANK OF INDIA
(FINANCIAL MARKETS REGULATION DEPARTMENT)
(CENTRAL OFFICE)
NOTIFICATION
Mumbai, the 30th April, 2024
Foreign Exchange Management (Margin for Derivatives Contracts) (First Amendment) Regulations, 2024
No. FEMA.399(1)/2024-RB.—In exercise of the powers conferred by clause (h) of sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Margin for Derivatives Contracts) Regulations, 2020 [Notification No. FEMA.399/RB-2020 dated October 23, 2020] (hereinafter referred to as ‘the Principal Regulation’), namely:-
1. Short title and commencement
(i) These Regulations shall be called the Foreign Exchange Management (Margin for Derivatives Contracts) (First Amendment) Regulations, 2024.
(ii) They shall come into force with effect from the date of their publication in the Official Gazette.
2. Amendment to the Principal Regulation
(i) In the Principal Regulation, in Regulation 2, in clause (v), sub-clause (c) shall be substituted with the following, namely: –
c) Credit Derivative Contract undertaken in terms of the Master Direction – Reserve Bank of India (Credit Derivatives) Directions, 2022 (Notification no. FMRD.DIRD.11/14.03.004/2021-22 dated February 10, 2022), as amended from time to time, and
(ii) In the Principal Regulation, Regulation 4 shall be substituted with the following, namely:-
4. Permission
(1) Notwithstanding anything contained in any other regulation issued by the Reserve Bank under the Act and for the time being in force, and subject to directions issued by the Reserve Bank in this regard, authorised dealers may:
(i) Post and collect margin, in India and outside India, for a permitted derivative contract entered into with a person resident outside India, and receive and pay interest on such margin.
(ii) Post and collect margin, outside India, for a permitted derivative contract entered into with another authorised dealer, provided that at least one of the authorised dealers is a branch of a foreign bank, and receive and pay interest on such margin.
(iii) Post and collect margin, in India and outside India, for derivative transactions of their overseas branches and International Financial Services Centre Banking Units, and receive and pay interest on such margin.
Provided that posting and collection of such margin and receipt and payment of interest on the margin may be undertaken by the Authorised Dealer or by its overseas branches or its overseas head office (including its overseas branches), subject to terms and conditions specified by the Reserve Bank.
(2) Notwithstanding anything contained in any other regulation issued by the Reserve Bank under the Act and for the time being in force, and subject to directions issued by the Reserve Bank in this regard, authorised dealers may post and collect margin, in India and outside India, on behalf of their customers for a permitted derivative contract entered into with a person resident outside India and receive and pay interest on such margin.
DIMPLE BHANDIA, Chief General Manager
[ADVT.-III/4/Exty./085/2024-25]
Foot Note:- The Principal Regulation was published in the Official Gazette of India – Extraordinary: Part III–Section 4, vide Gazette ID CG-MH-E-28102020-222786 dated 28.10.2020 [Notification no. FEMA 399/RB-2020 (Foreign Exchange Management (Margin for Derivatives Contracts) Regulations, 2020) dated October 23, 2020].
