In a move to further deregulate the Indian equity derivatives market, the Reserve bank of India (RBI) has broadened the number of instruments for maintenance of collateral by foreign institutional investors (FIIs) undertaking derivatives transactions.
The central bank has decided in consultation with the government of India and Securities and Exchange Board of India (SEBI) to permit Sebi approved clearing corporations of stock exchanges and their clearing members to open and maintain demat accounts with foreign depositories and to acquire, hold, pledge and transfer the foreign sovereign securities, offered as collateral by FIIs.
Also they can remit the proceeds arising from corporate action, if any, on such foreign sovereign securities and liquidate then if the need arises. The guidelines are aimed at further liberalizing the procedure.
Presently, FIIs have to maintain either cash or domestic government securities as collateral for trading in the derivatives segment.
The central bank has also asked clearing corporations to report, on a monthly basis, the balances of foreign sovereign securities, held by them as non-cash collaterals of their clearing members to the chief general manager, Foreign Exchange Department, RBI by the 10th of the following month to which it relates.
