On Jun. 16, IND RBI proposed draft directions on OTC derivatives.
IND RBI issued on its website draft directions on margining for non-centrally cleared OTC derivatives directions, 2022 under section 45 W of the RBI act, 1934.
Outlines entity scope, calculation of margin, exchange of margin, treatment of Variation margin under collateralize to market approach, initial margin treatment.
Eligible collateral and haircuts, requirements for cross-border deals, dispute resolution.
Effectiveness
Comments period closes Jul. 29, 2022.
In Jul. 2022, GFMA responded to RBI consultation on OTC derivatives, see #145579.
May 2024 Master Direction
On May 8, 2024, IND RBI issued Master direction - RBI (margining for non-centrally cleared OTC derivatives) directions, 2024, which applies to specifiied types of non-centrally cleared derivatives contracts in foreign exchange, interest rates, and credit.
Transactions involving government entities, RBI, other specified parties are exempt.
Specifies requirements for initial, variation margin for different types of covered entities.
Definitions provided for domestic covered entities, foreign covered entities with specific thresholds for average aggregate notional amount (AANA) of outstanding derivatives.
Details on how margins should be calculated, collected, and exchanged; also lists eligible collateral types and standards for both variation and initial margins.
Specifies eligible collateral, haircuts applicable to mitigate risk; details how collateral shall be managed, including requirements for segregation, rehypothecation restriction.
Entities engaging in cross-border derivatives must align with international standards and ensure comparability with margining frameworks of foreign jurisdictions.
