DERIVATIVES: NORMS FOR OFF-BALANCE SHEET EXPOSURE TIGHTENED

Overdue receivables representing positive mark-to-market (MTM) value of a derivative contract should be treated as a non-performing asset, if these remain unpaid for 90 days or more. In a notification on the prudential norms for off-balance sheet exposure of banks, the Reserve Bank of India said that all other facilities granted to the client should also be classified as NPAs based on
the principle of borrower-wise classification.

• Restructured Derivatives: In case where a derivatives contract is restructured, the MTM value of the contract on the date of restructuring should be cash settled .For this purpose, any change in any of the parameters of the original contract would be treated as restructuring .This instruction will also be applicable to the foreign branches of the Indian Banks.