Master Direction – Reserve Bank of India (Variation Margin) Directions, 2022
The Reserve Bank of India has issued directions for the calculation and exchange of variation margins for non-centrally cleared derivatives (NCCDs).
Applicability: These directions apply to covered entities, including banks, non-banking financial companies, and other financial institutions.
Entity Scope: Covered entities are those with an average aggregate notional amount of outstanding NCCDs exceeding ₹50,000 crore.
Calculation and Exchange of Variation Margin: Variation margins must be calculated and exchanged daily, with a minimum transfer amount of ₹5 crore.
Eligible Collateral and Haircuts: Eligible collateral includes cash, government securities, and other low-risk assets, with standardized haircuts applied.
Treatment of Collateral: Collateral must be valued at market prices, with a “collateralise to market” approach.
Margin Requirements for Cross-Border Transactions: Variation margins must be exchanged for cross-border transactions, with specific requirements for non-resident entities.
Dispute Resolution: Disputes related to variation margins must be resolved through a dispute resolution process.
Annex: A standardized haircut schedule is provided in the annex.
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