Home › Circulars › RBI/2011-12/379

RBI Master Circular on Risk Management and Inter-Bank Dealings

No longer current — replaced by Master Circular on Export of Goods and Services (updated as on July 01, 2012)
Source: Reserve Bank of India · RBI/2011-12/379 · issued 31 Jan 2012 · ~2 min read
Quick answerThis 2011-12 Master Circular consolidates all RBI instructions on foreign exchange derivative contracts, overseas hedging, and inter-bank dealings for AD Category I banks. It requires banks to verify underlying exposure documents within 15 days and sets a one-year validity, expiring July 1, 2012.

What changed

The circular consolidates existing instructions on risk management and inter-bank dealings into a single document, replacing earlier circulars. It introduces a sunset clause, making the circular valid only until July 1, 2012, after which an updated version will replace it. Key operational guidelines include a 15-day window for submitting underlying documents and restrictions on booking contracts if documents are repeatedly late.

What it means for you

Banks must strictly enforce the 15-day document submission rule for derivative contracts, cancelling contracts and withholding exchange gains if deadlines are missed. Repeated non-compliance (more than three times in a financial year) will require upfront document submission for future contracts. This circular also clarifies that all underlying exposures must be verified, whether current or capital account transactions.

Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.

What banks were required to do at the time

Who it affects

AD Category I banks, Persons resident in India (other than AD Category I banks) using derivative contracts, Statutory auditors of entities booking derivative contracts

❓ Common questions

Regulatory timeline

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

What happens if a customer fails to submit underlying documents within 15 days?

The contract must be cancelled, and any exchange gain should not be passed on to the customer. If this happens more than three times in a financial year, future contracts require upfront document submission.

Is this circular still valid?

No, it had a sunset clause and stood withdrawn on July 1, 2012. It was replaced by an updated Master Circular on the same subject.

What types of transactions are covered under this circular?

It covers foreign exchange derivative contracts, overseas commodity and freight hedging, rupee accounts of non-resident banks, and inter-bank foreign exchange dealings.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Superseded by Master Circular on Export of Goods and Services (updated as on July 01, 2012)
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/379 Master Circular No.12 /2011-12 (Updated as on January 31, 2012) July 01, 2011 To, All Authorised Dealers - Category I Banks Madam / Sir, Master Circular on Risk Management and Inter-Bank Dealings Foreign Exchange Derivative Contracts, Overseas Commodity & Freight Hedging, Rupee Accounts of Non-Resident Banks, Inter-Bank Foreign Exchange Dealings, etc. are governed by the provisions in Notification No. FEMA 1/2000-RB , Regulation 4(2) of Notification No. FEMA 3/RB-2000 and Notification No. FEMA 25/RB-2000 dated May 3, 2000 and subsequent amendments thereto. 2. This Master Circular consolidates the existing instructions on the subject of "Risk Management and Inter-Bank Dealings" at one place. The list of underlying circulars/notifications is set out in Appendix. 3. This Master Circular is issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2012 and would be replaced by an updated Master Circular on the subject. Yours faithfully, (Meena Hemchandra) Chief General Manager- in- Charge INDEX PART – A
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/379 · issued 31 Jan 2012. The plain-English explanation above is BankPulse’s own independent summary.
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Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6980&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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