RBI/2017-18/27
DNBR (PD) CC.No.094/03.10.001/2017-18
July
27, 2018
All Standalone Primary Dealers
Madam/Sir,
Diversification of activities of
Standalone Primary Dealers-Foreign Exchange Business
Please refer to Para 11 of the
Statement on Developmental and Regulatory Policies issued as part of
the Second Bi-monthly Monetary Policy
Statement for 2018-19, dated June 06, 2018, on expanding activities
of Standalone Primary Dealers (SPDs).
2. In order to facilitate SPDs
to provide comprehensive services to their FPI clients, it has been decided
to permit them to offer foreign exchange products to their FPI clients, as
permitted by the Bank from time to time. Such activities shall be part of
their non-core activities. The SPDs shall adhere to the following
prudential regulations:
i.
SPDs,
while calculating the total risk weighted assets, shall include the forex
exposures for maintenance of minimum Capital to Risk-Weighted Assets Ratio
(CRAR) of 15 per cent on an ongoing basis. Details of capital charge
calculation shall be as per the Master Directions on Standalone Primary
Dealers (Reserve Bank) Direction, 2016, as updated from time to time.
ii.
SPDs
shall adhere to the guidelines for foreign exchange exposure limits as
prescribed by the Bank from time to time.
iii.
SPDs
shall frame a Board approved policy to undertake and monitor the foreign
exchange business.
3. SPDs desirous of offering
forex products to their FPI clients may approach the Reserve Bank of India,
Foreign Exchange Department, Central Office, Mumbai for the necessary AD
licence.
4. While offering foreign
exchange derivative contracts to their FPI clients, SPDs shall comply with
the provisions of the Foreign Exchange Management Act 1999, and all rules,
regulations and directions issued thereunder. In particular, they shall
adhere to the provisions of the following instructions to the extent of
foreign exchange products allowed to the SPDs:
i.
Comprehensive
Guidelines on Derivatives (DBOD
No.BP.BC.86/21.04.157/2006-07 dated April 20, 2007), as amended from
time to time;
ii.
Master
Direction on Risk Management and Inter-Bank Dealings (RBI/FMRD/2016-17/31 dated July 5, 2016), as
updated from time to time; and
iii.
Guidelines
for Internal Control over Foreign Exchange Business
(FE.CO.FMD.No.18380/02.03.137/2010-11 dated February 3, 2011), as amended
from time to time.
5. The Standalone Primary
Dealers (Reserve Bank) Directions, 2016, shall accordingly be updated.
Yours faithfully
(Manoranjan Mishra)
Chief General Manager
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