The Reserve Bank of India on 1st June 2022, has published the Master Direction – Reserve Bank of India (Variation Margin) Directions, 2022 which shall come into force with effect from 1st December, 2022. The directions shall apply to the Non-centrally cleared foreign exchange derivative contracts undertaken in terms of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 and Non-centrally cleared interest rate derivative contracts undertaken in terms of the Rupee Interest Rate Derivatives (Reserve Bank) Directions, 2019 and any other non-centrally cleared derivative (NCCD) contract as may be specified by the Reserve Bank.
The following entities shall be classified as Domestic Covered Entities under these Directions:
- Entities regulated by a financial sector regulator (including branches of foreign banks operating in India) and having an Average Aggregate Notional Amount (AANA) of outstanding NCCDs of ₹25,000 crore and above, on a consolidated group wide basis.
- Other resident entities having an AANA of outstanding NCCDs of ₹60,000 crore and above, on a consolidated group wide basis.
The Non-resident financial entities having an AANA of outstanding NCCDs of USD 3 billion and above, on a consolidated group wide basis and Other non-resident entities having an AANA of outstanding NCCDs of USD 8 billion and above, on a consolidated group wide basis shall be classified as Foreign Covered Entities under these Directions.
AANA of outstanding NCCDs shall be calculated as the simple average of the total notional amount of outstanding NCCDs as at the end of March, April and May of a year. AANA for a year shall be used for recognition of Domestic Covered Entities and Foreign Covered Entities for a one-year period from September 1 of that year to August 31 of the next year.
Further the AANA calculation shall include all NCCD contracts of the consolidated group, including those outside the scope of these Directions, but exclude intra-group transactions.
