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TMI BlogRisk Management and Inter-Bank DealingsX X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the Authorised Dealers. 3. In view of the various developments in the forex markets a group comprising officials of Reserve Bank of India, representatives of select banks and the Foreign Exchange Dealers Association of India (FEDAI) went into the various issues involved in the guidelines relating to the Foreign Exchange Exposure Limits of Authorised Dealers. Based on the recommendations of the group, it has been decided to revise the existing guidelines on calculation of the Foreign Exchange Exposure Limits of the Authorised Dealers. The revised guidelines are provided in the Annex. 4. Further, for the present , it has been decided to withdraw the restrictions placed on open positions limit of the Authorised Dealers involving Rupe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit for positions involving Rupee as one of the currencies (NOP-INR) for exchange rate management. For banks incorporated in India , the exposure limits fixed by the Board should be the aggregate for all branches including their overseas branches and Off-shore Banking Units. For foreign banks, the limits will cover only their branches in India. i. Net Overnight Open Position Limit (NOOPL) for calculation of capital charge on forex risk NOOPL may be fixed by the boards of the respective banks and communicated to the Reserve Bank immediately. However, such limits should not exceed 25 percent of the total capital (Tier I and Tier II capital) of the bank. The Net Open position may be calculated as per the method given below: 1. Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Overall Net Open Position This involves measurement of risks inherent in a bank's mix of long and short position in different currencies. It has been decided to adopt the "shorthand method" which is accepted internationally for arriving at the overall net open position. Banks may, therefore, calculate the overall net open position as follows: i. Calculate the net open position in each currency (paragraph 1 above). ii. Calculate the net open position in gold. iii. Convert the net position in various currencies and gold into Rupees in terms of existing RBI / FEDAI Guidelines. All derivative transactions including forward exchange contracts should be reported on the basis of Present Value (PV) adjustment. iv. Arrive at the sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reserve Bank from time to time 5. Other Guidelines i. ALCO / Internal Audit Committee of the Authorized Dealers should monitor the utilization of and adherence to the limits. ii. Authorized Dealers should also have a system in place to demonstrate, whenever required, the various components of the NOOP as prescribed in the guidelines for verification by the Reserve Bank. iii. Transactions undertaken by Authorized Dealers till the end of business day may be computed for calculation of Foreign Exchange Exposure Limits. The transactions undertaken after the end of business day may be taken into the positions for the next day. The end of day time may be approved by the bank s Board. ii. Limit for positions involving Rupee as one of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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