RBI Allows Standalone Primary Dealers Foreign Currency Borrowing

• 04 May 2024

On 3rd May 2024, the RBI permitted standalone primary dealers (SPDs) to borrow in foreign currency from parent companies and authorized entities, facilitating foreign exchange business management.

Key Points

• Overdraft Facility in Nostro Accounts: SPDs now eligible for overdraft facilities in nostro accounts exclusively for operational purposes, enhancing liquidity management.
• Compliance with Foreign Borrowing Limits: Borrowings by SPDs must adhere to RBI-prescribed limits for foreign currency borrowings, ensuring regulatory compliance.
• Reporting Excess Withdrawals: SPDs required to report excess withdrawals not adjusted within five days to RBI, with reporting deadlines set for timely compliance.
• Changes in Net Overnight Open Position Limit: RBI amends NOOPL calculation for forex risk capital charge, granting authorized dealers’ authority to fix limits, subject to regulatory constraints.
• Communication with RBI: Boards of authorized dealers mandated to inform RBI immediately through CIMS or email regarding NOOPL decisions, with limits capped at 25% of total capital.