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Thursday, June 24, 2021

RBI releases draft directions on variation margin; asks for comments

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NEW DELHI: The Reserve Bank of India on Monday released Draft Variation Margin (Reserve Bank) Directions, 2020 and asked the stakeholders to submit their suggestions and comments.

“Comments on the draft directions are invited from banks, market participants and other interested parties by October 15, 2020,” the central bank said in a press release.

The draft tries to set rules for calculation of margins, eligible collateral and haircuts, margin requirement for cross-border NCCD transactions and dispute resolution.

“The draft mandates variation margin to be calculated on a daily basis and exchanged at the earliest possible after the transaction date (“T”) or margin recalculation date (“R”), but no later than the end of the next local business day (“T+1” or “R+1″),” one of the rules say.

The draft said these directions will be applicable to non-centrally cleared derivative (NCCD) contracts entered by domestic covered entities.

Government of India, state governments, foreign sovereign, central bank, Multilateral Development Bank and Bank for International Settlements are not covered under these rules.

“These directions shall not be applicable to an NCCD transaction between entities belonging to the same consolidated group,” the draft adds.

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