interest rates and foreign currency derivatives

interest rates and foreign currency derivatives

However, there is an equal and urgent need to formulate accounting standards for certain interest rates and foreign currency derivatives for all corporates. Indian accounting standards are still in phase with respect to derivative accounting as formative in terms of grass, the fair value / cash flow accounting, and coverage of products. ICAI is seized of this issue and it is important that the forex association also facilitates the process of providing proposals to the Institute.
In the context of good corporate governance, the issue of disclosure of the majority of banks and corporates has become important. In the case of complex structured products, it is imperative that the banks / corporates to be transparent and disclose the nature and quantum of risks agreement and established systems to monitor these risks.
While the accounting and disclosure issues are dealt our attention, the RBI is also examining other recommendations of the Technical Group for phased implementation. One of the recommendations apply to covered options. As things stand, a corporate can only buy options supported by genuine underlying transactions / claims. Any structured products involving cost reduction is permitted provided that the underlying risk and no net receipt of premium. Included features to allow corporate to write covered calls and puts the subject of appropriate systems for risk management to be in place. This is expected to impart greater depth and liquidity of the market options and provide greater flexibility to market participants.
Similarly, we propose to revisit the procedures regarding the crystallization of unpaid export bills, which are formulated so long ago. Another recommendation of the Group for the correct price hedge. Currently, residents engaged in import / export activity can hedge the price risk of these goods in international trading. The proposal is to allow price fix hedges to the extent of the average quantity of goods purchased / sold during the previous three years, or during the previous year, whichever is greater. This will be applicable to goods imported / exported and procured in the country. RBI welcomes inputs from the Exchange Association in respect of the recommendations are examined.
The proposal by CCIL to extend guarantees solving U.S. $ / INR forward transactions from trade date is currently investigating with us. The settlement of warranty will be extended from trade date, we expect the liquidity and depth in the forward market to increase significantly. Risks that banks today carry on their books, on account of large outstanding forward positions will be significantly reduced.

Let me now turn the G-sec market.