FII can provide bonds as collaterals: RBI

New Delhi, July 20: In a move clearly aimed at preventing further rupee appreciation, the Reserve Bank of India (RBI) yesterday notified that Foreign Institutional Investors (FIIs) are permitted to offer foreign securities as collaterals for their transactions in the derivatives segment.

FIIs can now offer foreign securities with AAA rating as collaterals to recognised Stock Exchanges in India for their transactions in the derivatives segment.

This move of RBI will prevent further strengthening of the rupee against the greenback as foreign investors can now use foreign bonds rather than cash as collateral.

Till now a FII investing in derivative trading needed cash as a collateral whereby the investors had to bring in more dollars, which in turn leads to more rupee appreciation.

In consultation with the Government of India and SEBI, the approved clearing corporations of stock exchanges and their clearing members will open and maintain demat accounts with foreign depositories.

These clearing corporations shall report, on a monthly basis, the balances of foreign securities, held by them as non-cash collaterals of their clearing members to the RBI.

UNI