Forex Management Services by Kotak Mahindra Bank

Our Forex Management Solutions

mitigate-risk-on-fc-borrowings


With Us, You Can


mitigate-risk-on-fc-borrowings

With Us, You Can


convert-fc-receivables-and-payments

With Us, You Can


Research & Insights

Terms and conditions

This document refers to various regulatory directions / guidelines / framework that govern facilities for resident and non -resident persons to hedge their foreign exchange and interest rate risks. All counterparties shall adhere to and abide by the extant guidelines while executing any transactions / contracts with Kotak Mahindra Bank Ltd (“Bank”).

List of key FEMA / RBI regulations

 

Bank undertakes foreign exchange and derivative transactions, including foreign exchange conversions, foreign exchange derivatives, interest rate derivatives and combinations thereof, with customers as per extant regulations and the Bank’s internal policies and frameworks. Bank exercises its sole discretion to take the decision regarding what products is/are to be offered to a customer. Bank also reserves its unfettered right to stop offering one or more of these products / services to a customer at its sole discretion without any prior notice or intimation in this regard.

Bank’s interpretation of the extant regulatory guidelines is final, conclusive and binding on the customer, including on the way specific transactions are structured and the regulatory basis for undertaking a transaction. The broad outline of this for hedging transactions is in the framework on implementation of hedging guidelines, updated here.

Bank will execute foreign exchange and derivatives transactions at rates that Bank believes are  applicable rates for  such transactions. Such "applicable rate" will be a rate quoted by the Bank after taking into account inter-alia, reference market rates, various risk factors including liquidity and volatility, costs, spreads and any other factor which the Bank feels is relevant to the transaction. There could be possibility of variations in Customer's assessment of the applicable rate for a transaction vis-a-vis Bank's quote. The Customer shall independently assess whether the rates quoted by Bank are acceptable prior concluding the deal.

Irrespective of any prior discussions, indicative pricings, and any formal or informal commitments as to the applicable spreads or margins for a transaction, the rate at which the deal is finally concluded shall be binding on both the Bank as well as its customer. It is assumed that the customer has satisfied himself / herself as to the net rate offered by the Bank before concluding the transaction, including the spread or margin applied on such transactions. In order to satisfy himself / herself about the rate for a transaction, the customer is free to approach his / her relationship team or any of the authorised officials of the Bank to determine and agree on such rates before concluding a transaction. The choice of doing so and the onus of satisfying himself / herself as to the spreads / margins and net rate on a transaction is solely on the customer. The Customer shall not dispute or raise any objection after a transaction / contract has been booked.

While executing foreign exchange and /or interest rate transaction / contract with Kotak Mahindra Bank, the customer/client shall be deemed to have confirmed that 

  • It has read and understood all the regulatory directions / guidelines / framework that governs the facilities for resident and non resident persons to hedge their foreign exchange and interest rate risks.
  • It understands that extant derivative guidelines includes forward contracts.
  • Transaction(s) / contract(s) have been executed by it after assessing the need for undertaking these and these are purpose of hedging our assets / liabilities and / or in connection with a line of business.
  • Notional and tenor of hedge transaction / contract does not exceed notional and tenor of underlying exposure
  • Underlying exposure hedged with Kotak Mahindra Bank has not been hedged with any other bank / institution
  • The risk management policy approved by the Board / relevant authority of the Client, permits the type of transaction/contract booked by it.
  • It is in full compliance with the internal approvals relating to the contracts/ transactions booked by it,
  • The values and amounts determined and calculated in respect of the transaction/ contract by the Bank (being a Calculation Agent) shall be binding on it.
  • In addition to other confirmations as applicable, where transaction(s) / contract(s) is / are booked under Contracted Exposure, the customer / client shall be deemed to have confirmed that:
    • The evidence of underlying exposure in the form of authenticated documents shall be submitted by it to the Bank within 15 calendar days from the date of the transaction(s) / contract(s). In the event the evidence of underlying exposure is not provided by it within the stipulated timeline or is not up to the satisfaction of the Bank, the transaction(s) / contract(s) shall be cancelled. Losses upon such cancellation shall be recovered from it (the client) and gains, if any, shall not be passed on to it.
  • In addition to other confirmations as applicable, where the transaction(s) / contract(s) is / are booked under Anticipated Exposure, the client confirms that:
    • If transaction(s) / contract(s) is / are booked for the purpose of hedging capital account transactions under anticipated exposure, then it shall provide information of such exposure like anticipated nature of transaction, expected date and amount of the agreement.
    • Transaction(s) / contract(s) booked under Anticipated Exposure can be freely cancelled and rebooked. However, net gains (gains over and above losses if any) on contracts booked under Anticipated Exposure shall be passed on to it only at the time of the cash flow of the anticipated / possible underlying transaction after submitting the evidence of such cash flow through Bank’s counter. Losses shall be immediately payable by the client. In case of part delivery, net gains will be transferred on a pro-rata basis. The client/customer further agrees that any decision of the Bank with regard to establishing linkages for the purpose of net gains shall prevail. The client/customer shall not ask for the gains not passed on to it or contest the losses payable by it  on account of lack of or absence of cash flows from the underlying transaction or otherwise
    • In order to establish linkages between contracts originally booked and subsequently rolled over or rebooked, the client undertakes to provide necessary details like unique reference number of the exposure or similar such information at each such market action up to the satisfaction of the Bank. In the absence of such information, Bank may treat the contract under new exposure
    • The Bank, when passing on the gain on cancellation, may obtain confirmation from the client that the underlying cash flow delivery / exposure being referenced to avail gain for a contract would not be used for any other contract either under the contracted or anticipated exposure with any other bank.
    • It shall be the sole responsibility of the client to assess the need for undertaking a transaction(s) / contract(s) depending on its possible exposure to foreign exchange risk.
  • In addition to other confirmations as applicable, where the transaction(s) / contract(s) is / are booked under USD 10 Million equivalent facility (facility to book hedging transactions(s) / contract(s) upto USD 10 million equivalent, outstanding at any given point of time, without providing proof of underlying), the client/customer by agreeing to enter/entering into a contract/transaction with the Bank, confirms to the following:
    • That it chooses to book transaction(s) / contract(s) under the Contracted Exposure method using USD 10 Million equivalent facility, if the outstanding notional across all the Banks exceeds USD 10 Million equivalent, it shall be required to furnish information and / or documents as may be required under Contracted Exposure for all the outstanding contracts. (without limiting its liability or obligation to furnish documents as and when required and called for, by the Bank for contract booked under any method).  It shall furnish all documents as required by the Bank assuming that the entire exposure has been booked under Contracted Exposure and the underlying shall be in existence on the day of first booking of transaction(s) / contract(s). Further, it confirms to duly discharge its obligation to furnish any/all such documents called for by the Bank in exercise of its exclusive right in this regard to do so.
    • Notwithstanding any method of booking the contract, the Client acknowledges that the underlying exposure should be either available (for Contracted Exposure) or is anticipated to accrue (in case of Anticipated Exposure) as on the date of booking of the respective outstanding contract. It further acknowledges that having once exceeded the limit of USD 10 Million equivalent (outstanding contracts at any point of time), it will not be eligible to again avail of the said documentary relaxation in future during the same financial year and all contracts outstanding under this limit shall be governed thereafter by the respective applicable rules of contracted and anticipated exposure.
    • In case Bank is not satisfied of the underlying exposure, it reserves its right to classify a trade booked under contracted exposure as one booked against anticipated exposure / cancel the trade / or take any other action, as it deems reasonable. These could include, but are not limited to, not permitting further trades under anticipated exposure, requiring proof of exposure before booking further trades or withholding some of the profits which may fall due for the client.
    • If a trade is cancelled by the Bank because it is not satisfied about the underlying exposure then the profits on such trades would be withheld and losses would have to be borne by the Client.
    • Any such event of exceeding the limit with any other bank shall be brought to the notice of the Bank immediately by the client.
  • General conditions applicable for all contracts:
    • The product offering of the Bank shall be guided by the extant guidelines on derivatives, guidelines on suitability and appropriateness, internal policies and procedures of the Bank, and the Bank’s assessment of the client.
    • Once a contract is entered into for an underlying exposure, any change in the existence of underlying exposure for which contract has been booked and outstanding will be brought to the immediate notice of the Bank. Outstanding contracts, if any, for such exposures would be suitably modified, including cancelling part or all of the notional, to comply with regulations and this framework.
    • In order to satisfy itself on the applicability of relevant regulations and internal guidelines, the Bank may call for additional information from the client including:
      • Documentary proofs of underlying exposures
      • Basis of assessments of anticipated exposures
      • Declarations or certifications from the client or from external parties
      • Any other aspects related to the exposures and hedges of the client
    • Failure to adhere to such requests, or in cases where the bank is not reasonably satisfied about the underlying exposures, or in case where there is a reason for the Bank to believe that there has been misuse of the facilities provided or misrepresentations done to the Bank, the Bank reserves its right to :
      • Reclassify exposures where necessary
      • Cancel contracts and withhold profits and recover losses from such cancellations
      • Enter into further transactions only on being convinced of the exposure, if necessary by seeking documents prior to the deal, or
      • Any other form of action to protect the interests of the Bank and ensure conformity with extant regulations
    • Any information, declaration, undertaking or documents provided to the Bank (to ensure compliance of the regulation) either in physical or electronic form while availing entering into contracts with the Bank or when the bank seeks additional information would be in accordance with client’s own constitution.
    • The Contract is subject to prevailing RBI regulations and the Client shall always comply with the prevalent rules and regulations.
  • The Bank shall be entitled to cancel the contract at any time in the event the Client defaults
  • The Client understands and accepts the terms & conditions and risks of the Transaction. By agreeing to enter/entering into a contract/transaction with the Bank, the Client agrees, confirms and undertakes that:
    • It has assessed and satisfied itself on the Transactions’ suitability, inherent risks and merits and any tax, legal and accounting implications, which it may have.
    • It has made an independent decision to enter into transaction(s) / contract(s) after understanding all the contours of transaction(s), rationale and the risks involved in these, including inter-alia the risks disclosed by it to the Bank (whether under the term sheet or otherwise).
    • It understands the risks of transaction(s) booked by it, the potential adverse scenarios for it and that there could be significantly large payouts in the event of adverse market movements. It also understand that the value of the transaction(s), which could be the value the counterparty (that is out of the money) will have to pay to the other in case of an early termination, could vary significantly during the life of the contract. It is  capable of assuming the financial and other risks that may arise as a result of execution of these transaction(s)
    • It has not received any assurance or guarantee from the Bank as to the expected results of the transaction(s)
    • It has adequate underlying exposure for which the transaction(s) / contract(s) are booked and said underlying exposure(s) has / have not been used to book other transaction(s) / contract(s) with any other bank or with Kotak Mahindra Bank for other transaction(s)
    • It accepts the risk that the transaction(s) may not fully or properly match its underlying liability or asset, and may not necessarily mitigate the overall risks arising out of the exposure. In case of any consequent change to the transaction(s) to make it consistent with the underlying, it shall be solely liable for any costs, expenses and losses (if any). For avoidance of doubt, it is hereby clarified that the Bank shall not be liable to pass on any gains on account of such modification
    • The concerned Director(s) / Authority(ies) /Authorised personnel and/or the senior management official(s) of the Client have examined the terms of this transaction / contract and have approved the same
    • It has fully examined and understood the explanations, disclaimers, provisions, terms and conditions (“Provisions”) of the term sheet issued in respect of transaction(s) / contracts booked by it and hereby agrees with the Provisions / acknowledges the same
    • While executing transaction (s) / contract(s) with the Bank, it shall be in full compliance with the limits, if any set by it for itself. it will at its own costs and expenses take necessary measures to comply with such limits, during the tenor of any outstanding contract(s) with the Bank.
  • The Client represents to the Bank on the date hereof (and these representations shall be repeated on each day) that:
    • Non-Reliance: It has made its own independent decision to enter into this transaction.  It is acting at arms’ length for its own account, and it is not relying on any communication (written or oral) of the Bank as a recommendation or investment advice to enter into the transaction. It has been clearly understood by us and we acknowledge and accept the fact that the information and explanations related to the Terms and Conditions of a transaction under no circumstances shall be considered as an investment advice or a recommendation to enter into that transaction. No communication (written or oral) received by us from the Bank shall be ever deemed as an assurance or guarantee towards the expected results of that Transaction
    • Evaluating and Understanding: It  has entered into this transaction(s) in reliance to its own judgment after taking such tax, accounting, regulatory, legal, financial and other related advice as deemed necessary by it and not in reliance on any view or other statement expressed by the Bank. It understands the terms, conditions and risks of the transactions and it is willing to accept those terms and conditions and to assume (financially and otherwise) the risks. It further represents that it is capable of understanding the merits and assuming the financial and other risks that may arise as a result of execution of these transaction(s).
    • Status of Parties: The Bank is not acting as a fiduciary for or an adviser to it in respect of this transaction.