I came across a Notification issued by RBI on 23rd October 2020 (to be called Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020), which mentioned the following (on Page 3) -
3. Prohibition
Save as otherwise provided in these regulations and any other regulations issued under the Act and in force on the date of commencement of these regulations,
no person shall post or collect margin for derivative contracts and pay or receive interest on such margin without the prior permission of the Reserve Bank.
According to it, the definition of margin is -
iv) “Margin” means the collateral that the parties to a derivative contract post with or collect from each other
(whether directly or through a third party) to cover some or all of the credit risk that the provider of the
collateral poses for the receiver of the collateral;
And the definition of “Derivative” is the same as the one assigned in Foreign Exchange Management (Permissible Capital Account Transactions) (Amendment) Regulations, 2019 (on Page 5) -
“(da) ‘Derivative’ means a financial contract, to be settled at a future date, whose value is derived
from one or more financial, or non-financial variables.”
Also found some blog posts/bulletins about this notification -
-
RBI introduces the Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020
- This explains things from the Authorised dealers perspective -
Monthly GAAP Bulletin November 2020 (Page 10)
From the date these regulations come into effect, no person can post or collect margin for derivative contracts and pay or receive interest on such margin without the prior permission of the RBI.
Does this mean that even option buying is now not permitted? (In an earlier post in this thread - Trading Derivatives in USA from India - #208 by namitjain2890 - it was mentioned that Interactive Broker was allowing it for Indian customers)
Tagging @Pro_Trader1 as they seem to be knowledgable about this topic