swap transactions can now be rebooked/ reentered after cancellation

RBI/2014–15/469

A.P. (DIR Series) Cir­cu­lar No. 78

Feb­ru­ary 13, 2015

Risk Man­age­ment and Inter Bank Deal­ings: For­eign Cur­ren­cy (FCY) — INR Swaps

Atten­tion of Autho­rised Deal­ers Category-I (AD Category-I) banks is invit­ed to the For­eign Exchange Man­age­ment (For­eign Exchange Deriv­a­tive Con­tracts) Reg­u­la­tions, 2000 dat­ed May 3, 2000 (Noti­fi­ca­tion No. FEMA/25/RB-2000 dat­ed May 3, 2000) as amend­ed from time to time and A.P. (DIR Series) cir­cu­lar no. 32 dat­ed Decem­ber 28, 2010, as amend­ed from time to time. 

2. In terms of para­graph (1) (iv) of sec­tion B con­tained in the annex to the above cir­cu­lar, eli­gi­ble res­i­dents can enter into FCY-INR swaps to hedge exchange rate and/or inter­est rate risk expo­sure aris­ing out of long-term for­eign cur­ren­cy bor­row­ing or to trans­form long-term INR bor­row­ing into for­eign cur­ren­cy lia­bil­i­ty, sub­ject to oper­a­tional guide­lines, terms and con­di­tions list­ed there­un­der. As per con­di­tion list­ed at (e), swap trans­ac­tions, once can­celled, shall not be rebooked or reen­tered, by whichev­er mech­a­nism or by what­ev­er name called.

3. To per­mit greater flex­i­bil­i­ty to the res­i­dents bor­row­ing in for­eign cur­ren­cy, it has been decid­ed that in cas­es where the under­ly­ing is still sur­viv­ing, the client, on can­cel­la­tion of the swap con­tract, may be per­mit­ted to re-enter into a fresh FCY-INR swap to hedge the under­ly­ing but only after the expiry of the tenor of the orig­i­nal swap con­tract that had been can­celled. All oth­er oper­a­tional guide­lines, terms and con­di­tions gov­ern­ing FCY-INR swaps remain unchanged.

4. AD Category‑I banks may bring the con­tents of this cir­cu­lar to the notice of their con­stituents and customers.

5. The direc­tions con­tained in this cir­cu­lar have been issued under Sec­tions 10(4) and 11(1) of the For­eign Exchange Man­age­ment Act, 1999 (42 of 1999) and are with­out prej­u­dice to permissions/ approvals, if any, required under any oth­er law.

Yours faith­ful­ly

(Dim­ple Bhandia)

Gen­er­al Manager