Last week, the Reserve Bank of India, the country's central bank, announced that its rules on derivatives selling will be tightened in an aim to prevent sales of complex currency derivatives to local businesses and mid-sized companies that complained they had not been warned of the risk of the financial tools, The Wall Street Journal reports. In response to these tighter rules on derivatives, Indian banks have asked the central bank for more time to become compliant, according to the Journal report, citing individuals "familiar with the matter." The Reserve Bank didn't specify an implementation date and instead suggested the rules took effect immediately. In asking for more time, banks are largely seeking to sidestep a trading volume pinch in the currency-derivatives market. The rules, which were announced on August 2, also keep banks from selling products they can't price independently and also demand company executives be completely supported by their boards before they complete derivatives transactions. Speaking to the Journal, one individual noted that "companies need time to go to their boards and secure authorization for their finance people to execute derivatives trades, which was one of the new rules." Another source, also anonymous, noted that "immediate implementation as implied in the circular could kill the market."
FinCad
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