Is there light at the end of the tunnel?

Font Size

Print

Feedback

Email

Discuss

: and bring some order to the forex derivative business – which is an off-balance sheet exposure for banks. The apex body has stated its desire to review guidelines concerning off-balance sheet exposures of banks. At the moment there is no volume limit on the exposure that banks can take on derivative transactions. It is determined indirectly by capital adequacy norms with contracts upto six months having no limit at all, while contracts from six months to a year have a conversion factor of 2.5% and a capital adequacy of 9% etc. As the period goes up by a year, the conversion factor also increases by a percentage point. Capital adequacy in contrast remains constant. RBI proposes to review this conversion factor as also risk weights on derivative transactions.