News Excerpt: 

The Reserve Bank of India (RBI) announced that standalone primary dealers (SPDs) may borrow in foreign currency from their parent companies and other authorised entities.

More about News: 

• SPDs will be allowed to access overdraft facilities in nostro accounts solely for operational use. 
• Nostro is a bank account held in another country by a domestic bank but in the currency of a foreign country.  
• The RBI’s move will help companies manage funding for their foreign exchange business.
• The circular titled ‘Master Direction – Risk Management and Inter-Bank Dealings: Amendments’ further noted that “such borrowings shall be within the limit for foreign currency borrowings” prescribed in the RBI.
• Excess withdrawals not adjusted within five days must be reported to the RBI. 
• Such reporting should occur within 15 days from the end of the month in which the limits are exceeded. 
• SPDs are either subsidiaries of scheduled commercial banks or entities incorporated abroad or those incorporated under the Companies Act and registered as non-banking financial companies (NBFCs). 
• The RBI has also announced changes in the Net Overnight Open Position Limit (NOOPL) for the calculation of capital charges on forex risk. 
• Net overnight open positions are transactions that have not been squared off on an overnight basis.
• Under the old system, 
• NOOPL was allowed to be fixed by the boards of the respective banks. 
• However, now the boards of the respective authorised dealers can also decide on fixing the NOOPL.
• The decision on NOOPL needs to be communicated to the RBI “immediately through the Centralised Information Management System (CIMS) or email.
• However, such limits should not exceed 25 per cent of the total capital (Tier-I and Tier-II capital) of the authorised dealer.