The Indian branches of foreign banks can now reckon cash/unencumbered securities from the Head Office (HO) or remittable reserved surplus in Indian books, held with the Reserve Bank of India (RBI) as the credit risk mitigation (CRM) under Large Exposure Framework.
Such CRM technique can be used for offsetting gross exposure of non-centrally cleared derivative transactions of foreign bank branches in India to their HO.
As advised by us previously to some of our clients, RBI has also disallowed double counting of such funds/securities, as both for CRM and to fulfil regulatory/statutory requirements.
Other conditions:
(a) Banks to furnish an annual undertaking; and
(b) CRM has to be in compliance with the Basel Norms.
RBI has also stated that the derivative contracts executed prior to 1st April 2019 will be exempted while computing the exposure on the HO.
RBI has also stated that the derivative contracts executed prior to 1st April 2019 will be exempted while computing the exposure on the HO.
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12160&Mode=0
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