(Updates to add quotes, details)
By Suvashree Dey Choudhury and Neha Dasgupta
MUMBAI May 12 India's central bank said on
Monday that domestic banks will be allowed to offer structured
derivatives through their overseas branches even if these
products are currently not allowed in India.
The change marks a revision of rules passed in 2008 that
required domestic lenders to obtain approval from the central
bank before offering complex derivative products not allowed at
home to overseas customers.
Analysts said the move, announced in a statement and
effective immediately, appeared intended to provide a level
playing field for domestic banks, given that the central bank,
the Reserve Bank of India, cannot restrict the overseas
activities of foreign lenders.
"Indian regulations only permit plain vanilla derivative
structures," said Ananth Narayan G, managing director, global
markets and co-head of wholesale banking for South Asia at
Standard Chartered Bank in Mumbai.
"Conditions in major overseas centres are not this
stringent. Allowing foreign branches of Indian banks to deal in
structured products subject to conditions in that jurisdiction
could allow a level playing field for them with respect to local
Traders had speculated that the RBI could also allow
domestic banks to trade non-deliverable forwards (NDFs), and
even potentially allow the central bank to intervene through its
ownership of state-owned lenders.
However, a central bank official clarified that domestic
banks would still be barred from trading in these offshore
"There is no need to extend this (relaxation) to NDFs," a
senior official with direct knowledge of the RBI's plans told
(Editing by Rafael Nam and Susan Fenton)