What changed
The maximum float period for funds in the DDA account has been extended from three to five days, giving exchange houses more time to transfer collections. For non-DDA procedures, the collateral requirement has been reduced from a combined 30-day equivalent (15 days cash deposit plus 15 days bank guarantee) to a single 10-day equivalent, which can be held as either cash deposit or bank guarantee.
What it means for you
Banks can now offer exchange houses a longer float period, potentially improving client relationships and operational ease. The reduced collateral requirement lowers the liquidity burden on exchange houses, which may encourage more business through vostro accounts. However, banks must carefully assess the credit risk of exchange houses under the new, less stringent collateral norms.
What you must do
- Update vostro account agreements to reflect the new maximum float period of five days for DDA accounts.
- Revise collateral requirements for non-DDA procedures to a 10-day equivalent, accepting either cash deposit or bank guarantee.
- Communicate these changes to all relevant branches and constituents handling exchange house accounts.
- Review risk management policies to ensure adequate safeguards under the relaxed collateral norms.
Who it affects
AD Category-I banks, Non-resident exchange houses, Branches handling vostro accounts
What is the new maximum float period for DDA accounts?
The maximum float period has been increased from three days to five days, as per the revised instructions.
How has the collateral requirement changed for non-DDA procedures?
The collateral requirement has been reduced from a total of 30 days (15 days cash deposit plus 15 days bank guarantee) to a single 10-day equivalent, which can be either cash deposit or bank guarantee.