Emerging Markets Rates and Currencies Handbook

resident in India or resident outside India, and hence non-resident entities can access the onshore INR market to hedge INR denominated exposures. License Requirements No licenses required for clients to execute spot and forward transactions in the onshore market. A Legal Entity Identifier (LEI) is required for all derivative transactions as well as transactions up to spot with notional more than USD 1 MM (or equivalent). Requirements to open a foreign currency account All categories of foreign exchange earners, such as individuals, companies, etc., who are resident in India, may open Exchange Earners’ Foreign Currency Account (EEFC) - Permissible credits and debits to an EEFC account are clearly defined by the RBI regulations - Foreign currency bought against local currency cannot be credited to EEFC account - 100% foreign exchange earnings can be credited to the EEFC account subject to the condition that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes. This is not applicable for SEZ accounts. Requirements to open an INR account by non-resident entities Non-resident entities are permitted to open Special Non-Resident Rupee (SNRR) accounts for transactions commensurate with their business operations. Permissible transactions through the SNRR accounts include trader credits in INR, export/import invoiced transactions in INR, external commercial borrowings (ECB) in INR, etc. All categories of foreign exchange earners, such as individuals, companies, etc., who are resident in India, may open Exchange Earners’ Foreign Currency Account (EEFC): - Permissible credits and debits to an EEFC account are clearly defined by the RBI regulations. - Foreign currency bought against local currency cannot be credited to EEFC account. - 100% foreign exchange earnings can be credited to the EEFC account subject to the condition that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes. This is not applicable for SEZ accounts. Requirements to open an INR account by non-resident entities: Non-resident entities are permitted to open Special Non-Resident Rupee (SNRR) accounts for transactions commensurate with their business operations. Permissible transactions through the SNRR accounts include trader credits in INR, export/import invoiced transactions in INR, external commercial borrowings (ECB) in INR, etc. Deal Management Rollover: Permitted, mark-to-market at prevailing market rate. Net settlement. Unwinding: Permitted, an offsetting trade will be booked based on the prevailing market rate. Net settlement. Early Maturity: Permitted, gross settlement. The deal is settled at the original deal rate and the swap points are debited/credited separately. Transactions up to spot maturity are on a deliverable basis. Cancellation or rollover of such transactions is not permissible. In case of a cancellation, losses are passed to the client while gains are withheld. Documentation Requirements FX Spot: • KYC + Onboarding • No documents required at the time of booking. However, the deal has to be settled on delivery-basis. FX Forwards/derivatives: • KYC + Onboarding • Board resolution / Dealing mandate • ISDA, CSA (as applicable). Users can undertake execution of foreign exchange derivatives to hedge anticipated exposures and contracted exposures. a. Anticipated exposures: An exposure to the exchange rate of INR against a foreign currency on account of permissible current and capital account transactions, which are expected to be entered into in future. • Basic information around the nature of exposure being hedged to be provided at the time booking the derivative contract.