Mumbai: The Reserve Bank of India (RBI) on Wednesday revised the way banks calculate and report their foreign exchange exposures.The revised rules do away with the separate calculation of onshore and offshore net open positions (NOP), allow banks to include accumulated surpluses from overseas operations in NOP calculations, require forex risk capital charges to be maintained against actual NOP, and modify the shorthand method for measuring exposure by treating gold positions separately. The central bank has also allowed certain structural foreign exchange positions to be exempted from NOP calculations. Market participants said that the exemptions will create room for additional positions and improve trading capacity for banks.A key clarification in the final rules allows banks to exclude eligible structural foreign currency investments from NOP calculations on both a standalone and consolidated basis. These include capital investments and accumulated or unremitted earnings in overseas subsidiaries, branches, joint ventures and associates, provided they are non-dealing positions.
RBI eases forex exposure rules, giving banks more room to trade
The Reserve Bank of India has updated foreign exchange exposure rules for banks. These changes simplify calculations by merging onshore and offshore positions and allow inclusion of overseas earnings. Crucially, banks can now exclude certain long-term foreign currency investments, potentially boosting trading capacity. Forex risk capital will be based on actual net open positions, with gold treated separately.
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