RBI clarifies FERR rules for banks and ECB payments
In short
The Reserve Bank of India clarified how banks should handle foreign exchange risk reserve, or FERR. The rule does not apply to market-making or proprietary trading, and it will not affect ECB interest or dividends to non-resident investors.
Banks still need to keep the reserve until one day after the derivative contract ends. The reporting does not say how much money this will affect.
What the reporting says
The Reserve Bank of India clarified the foreign exchange risk reserve rule for banks, according to a publisher summary. The clarification says the requirement does not apply to market-making or proprietary trading, and it will not affect interest on External Commercial Borrowings or dividends payable to non-resident investors. The FERR must still be maintained until one day after the derivative contract ends; the broader market impact is not stated.
Why it matters
The Reserve Bank of India clarified the scope of foreign exchange risk reserve requirements for banks. The summary says the rule does not apply to market-making or proprietary trading, and it does not cover interest on External Commercial Borrowings or dividends paid to non-resident investors. Banks must maintain the reserve until one day after the derivative contract terminates. The reporting does not quantify the financial impact.