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Forward cover for RIBs spiked

Mumbai, July 23 (PTI): The Reserve Bank of India today asked banks not to extend any forward cover to non-resident Indians (NRIs) and overseas corporate bodies (OCBs) holding resurgent India bonds (RIB) maturing on October 1.

“As the original terms and conditions of RIBs had not envisaged the availability of forward cover for the maturing bonds, banks are advised that no forward cover should be offered to NRIs/OCBs holding these bonds,” RBI said in a communication to authorised dealers (ADs).

Similarly, the RBI said the Fema notification listing out the exposure for which forward cover could be offered by ADs to NRIs and OCBs does not cover RIBs.

The guidelines come in the wake of ICICI Bank extending forward contract deals with NRIs against RIBs even as some public sector banks had been denied permission for such transactions by the apex bank, banking sources said.

ICICI Bank sources said the bank had extended cover “for a few crore rupees” under which NRIs have contracted to sell the dollar proceeds on maturity to the bank for conversion into Indian currency at a pre-determined exchange rate.

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