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Corporate Laws Central Ministry of Finance Reserve Bank of India Act, 1934

Risk Management and Inter-Bank Dealings - Non-deliverable derivative contracts (NDDCs)

06-Jun-2023 | RBI/2023-2024/36 A. P. (DIR Series) Circular No. 05

RBI has issued a circular regarding the Risk Management and Inter-Bank Dealings for Non-deliverable derivative contracts (NDDCs) in which AD Cat-I banks operating International Financial Services Centre (IFSC) Banking Units (IBUs) are permitted to offer non-deliverable derivative contracts to a person resident outside India.

By virtue of this circular, such derivatives shall be cash-settled in foreign currency. Further, the following flexibilities shall be given for efficiently hedging programs:
1. AD Cat-I banks operating IBUs to offer NDDCs involving INR to resident non-retail users for the purpose of hedging. Such transactions shall be cash settled in INR; and
2. The flexibility of cash settlement of NDDCs transactions between two AD Cat-I banks, and between an AD Cat-I bank and a person resident outside India in INR or any foreign currency.

Also, the amendments have been made in the Master Direction of Risk Management and Inter-Bank Dealings dated 5th July 2016.

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