RBI reviews and updates banks’ net open position norms
Proposed rules align forex exposure with Basel standards
Changes aim for uniform implementation across regulated entities
RBI Proposes Changes To Banks' Forex Positions
RBI has proposed changes to banks’ foreign exchange position rules, aligning net open position norms with Basel standards to improve risk measurement and ensure consistency
Summary
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The Reserve Bank of India (RBI) on Wednesday proposed changes to rules governing banks' foreign exchange positions.
The amendments to net open position (NOP) were made following a comprehensive review of the existing instructions, according to an official statement.
NOP refers to the difference between banks' total foreign currency assets and liabilities, revealing their exposure to currency fluctuations or exchange rate risk.
The proposed guidelines are more closely aligned with the Basel Committee on Banking Supervision (BCBS) standards, the RBI said.
The RBI will also ensure a consistent implementation across regulated entities, it said.
Revisions include eliminating the separate offshore/onshore NOP calculation and including accumulated surplus from overseas operations in NOP.
Maintenance of the forex risk capital charge on the actual NOP and modifying the Shorthand method for calculation of NOP in alignment with Basel guidelines, which treats open position in gold separately, has also been proposed, it said.
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There is also a provision to exempt certain structural forex positions from NOP, the central bank added.
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