The Reserve Bank of India (RBI) has allowed Authorised Dealer (AD) Category-I Banks to post and collect margin in India, on their own account or on behalf of their customers, for a permitted derivative contract entered into with a person residing outside India.

The AD Cat-I Banks can post and collect margin in the form of Indian currency; freely convertible foreign currency; debt securities issued by Indian Central government and State governments; and rupee bonds issued by persons residing in India.

In the case of rupee bonds issued by persons residing in India, they have to be listed on a recognised stock exchange in India; and assigned a credit rating of ‘AAA’ issued by a rating agency registered with the Securities and Exchange Board of India.

If different ratings are accorded by two or more credit rating agencies, then the lowest rating shall be reckoned.

AD Cat-I banks may post and collect such margin outside India in the form of freely convertible foreign currency; and debt securities issued by foreign sovereigns with a credit rating of ‘AA-’ and above issued by S&P Global Ratings / Fitch Ratings or ‘Aa3’ and above issued by Moody’s Investors Service.

If different ratings are accorded by two or more credit rating agencies, then the lowest rating shall be reckoned.

The RBI, in a notification, said AD Cat-1 Banks may receive and pay interest on margin posted and collected on their own account or on behalf of their customers for a permitted derivative contract entered into with a person residing outside India.

Further, these banks shall maintain a separate account in the name of persons residing outside India for the purpose of posting and collecting cash margin in India, and transactions incidental thereto.

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