A.P.( DIR Series) Circular No. 4
July 28, 2006
All Category - I Authorised Dealer Banks
Madam / Sir,
Maintenance of collateral by Foreign Institutional
Investors (FIIs) for transactions in derivative segment
Attention of Authorized Dealer Category-I (AD)
banks is invited to Foreign Exchange Management (Transfer or Issue of Any Foreign
Security) Regulations, 2004 notified vide Notification No. FEMA 120/ RB-2004
dated July 7, 2004 and Foreign Exchange Management (Transfer or Issue of Security
by a Person Resident Outside India) Regulations, 2000 notified vide Notification
No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time.
2. It has been decided in consultation with
Government of India and Securities and Exchange Board of India (SEBI) to permit
FIIs to offer foreign sovereign securities with AAA rating as collateral to
the recognised Stock Exchanges in India for their transactions in derivatives
segment. The operational guidelines in this regard will be issued separately
by SEBI. Thereafter, recognised Stock Exchanges in India may approach the Reserve
Bank of India, Foreign Exchange Department, Central Office, Mumbai-400001 for
specific approvals as may be necessary under the Foreign Exchange Management
3. Necessary amendments to the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2000 notified vide Notification No. FEMA 20/2000-RB dated May 3,
2000 will be issued separately.
4. AD banks may bring the contents of this
circular to the notice of their constituents and customers concerned.
5. The directions contained in this circular
have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management
Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals,
if any, required under any other law.
Chief General Manager-in-Charge