Banks have sought more time from the RBI to operationalise the final guidelines on selling structured products to corporates as clients take a longer time to comply with the central bank's requirements.
The RBI guidelines, released on August 2, mandate banks to ensure that corporates which buy derivatives from them have a board-approved risk management policy in place. This requires companies to provide information on the personnel who will undertake transaction, limits and procedures that would be followed in monitoring positions.
Besides, it would also have to mark-to-market their positions on an ongoing basis. Banks say most of their clients are in no position to comply with this guideline with immediate effect, and have hence sought more time. Bankers also said there is no clarity as to the effective date of implementation.
Banks will need to have the copy of corporates' risk management policy which has been approved by their respective boards before they enter into a derivatives contract with a corporate. This would be applicable, even if a bank was to book a simple forwards contract with any corporate.
Banks have written to RBI through FEDAI to extend the time of implementation of guidelines. "The RBI has addressed a couple of critical parameters. The expectation now is to remove restrictions on product coverage. It is fair to restrict small & medium firms and provide better flexibility to large companies which fulfill the criteria," says Moses Harding, head of global markets, IndusInd bank.
"The board nod for a policy doesn't happen overnight. They will also have to finalise the limits. All this takes time. So, we have asked RBI to give three more months for the guidelines to become applicable," said the head of treasury at a private bank, on condition of anonymity.
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