In a bid to enhance the activities in international financial services centres (IFSCs), the Reserve Bank of India (RBI) has allowed IFSC banking units (IBUs) to engage in derivative transactions.
As per the latest update, an IBU can now become a member of the exchange in an IFSC to trade in interest rate and currency derivatives, the Business Standard.
” IBUs may carry out derivative transactions, including structured products that the banks operating in India have been allowed to undertake. However, they shall obtain RBI’s prior approval for offering any other derivative products,” said an official communique from RBI.
RBI has also permitted IBUs to extend bank guarantees and short- term loans to IFSC stock broking/commodity broking entities. The fixed deposits accepted from non-banks by the IBUs cannot be repaid prematurely within the first year.
However, fixed deposits accepted as collateral from non-banks for credit from IBUs or deposited as margin in favour of an exchange can be adjusted prematurely if the client defaults in repayment of the loan or meeting a margin call.
