Please refer to our circular No.MPD.BC.187/07.01.279/1999-2000 dated July 7, 1999 forwarding guidelines on FRAs/IRS.

2. In the 'Statement on Monetary and Credit Policy for the Year 2000-2001' announced on April 27, 2000, it has been indicated that with a view to providing more flexibility for pricing of rupee interest rate derivatives and to facilitate some integration between money and foreign exchange markets, the use of 'interest rates implied in the foreign exchange forward market' as a benchmark would be permitted in addition to the existing domestic money and debt market rates.

3. Accordingly, 'interest rates implied in the foreign exchange forward market' could, henceforth, be used as a benchmark for undertaking FRAs/IRS.

4. Kindly acknowledge receipt.