RBI Introduces Amendments to Master Direction on Risk Management and Inter-Bank Dealings

The Reserve Bank of India (RBI) has announced amendments to the Master Direction on Risk Management and Inter-Bank Dealings, aimed at enhancing regulatory clarity and oversight in the realm of foreign exchange derivative contracts.

Key Amendments Overview:

1. Inclusion of Standalone Primary Dealers (SPDs): Standalone Primary Dealers have been granted authorization under Section 10(1) of the Foreign Exchange Management Act (FEMA), 1999. Consequently, the Master Direction is being amended to reflect the applicability of its provisions to SPDs. These amendments aim to ensure that SPDs comply with all relevant directives issued by the RBI.

2. Updates on Reporting of OTC Derivative Contracts: Directions pertaining to the reporting of Over-The-Counter (OTC) foreign exchange derivative contracts and foreign currency interest rate derivative contracts to the Trade Repository of Clearing Corporation of India Ltd. have been updated and incorporated into Part E of the Master Direction. The amendments include updates on reporting formats, modes, timelines, and other relevant aspects to streamline reporting processes.

Immediate Implementation:

These amendments will come into effect immediately, superseding previous circulars listed in Appendix III of the Master Direction. The RBI emphasizes that compliance with these directives is mandatory for all Authorised Persons, including Authorised Dealer Category-I banks and Standalone Primary Dealers authorized under Section 10(1) of FEMA, 1999.

Regulatory Framework:

The directives outlined in this circular have been issued under Section 45W of the Reserve Bank of India Act, 1934, and Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999. It is emphasized that these directives are without prejudice to any permissions or approvals required under other laws.

The RBI's amendments to the Master Direction on Risk Management and Inter-Bank Dealings reflect its ongoing commitment to strengthening regulatory oversight and fostering compliance within the financial system. These measures aim to enhance transparency, efficiency, and risk management practices in foreign exchange derivative markets, ensuring the stability and integrity of the financial system.