RBI can probe derivatives flaw
Cuttack, Nov. 8: The CBI has said some banks have been found by the Reserve Bank to have violated foreign exchange norms in their derivatives trade, and the issue can be probed by the central bank and enforcement directorate (ED).
The agency, however, does not see any role for it as of now, and has said it could investigate into the matter only if any case is referred to it after a probe by the RBI or ED.
Replying to a notice by the Orissa High Court here for an inquiry into the alleged violations of the Fema and other norms in forex derivatives trade, the CBI said some violations had taken place in contracts signed by various banks. The court is hearing a petition, which has alleged that a massive fraud to the tune of about Rs 25,00,000 crore had been committed in the name of forex derivatives.
Derivatives are a financial contract whose value is derived from the estimated future price of a certain asset, rate or index and acts as a hedge or insurance against the underlying risks related to factors such as forex rate movements. The petitioner, Mr Pravanjan Patra, a city-based businessman, has contended that the Central government and the RBI have allowed selling of complex derivative products to investors in violation of the laid-out regulations and led to huge losses to the corporates and corresponding gains to the banks.
The CBI said in its submission that on the basis of responses it received from the RBI and the Forex Derivatives Cons-umers Forum, Tirrupur, Tamil Nadu, some violations of Fema and other regulations were made in the forex derivative contracts signed by various banks. — PTI
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