By Suvashree Dey Choudhury and Rafael Nam
MUMBAI (Reuters) - A deadline for Indian banks to sign agreements by March 31 to settle currency forward trades via a clearing house has been postponed, according to a letter from the domestic currency market association seen by Reuters.
The Reserve Bank of India wants all banks operating in the country agree to settle trades for currency forwards, with durations of up to 13 months, through Clearing Corporation of India Ltd (CCIL).
Opposition by foreign lenders to certain provisions has already led to the delay of the deadline several times since last year. Banks who do not agree to settle currency forward trades via CCIL may be prevented from trading these derivatives.
The Forex Dealers Association of India (FEDAI) informed members on Tuesday that a new implementation date and revised instructions would be announced in "due course", according to the letter.
FEDAI officials were not immediately available to comment.
Although the deadline extension will allow these currency derivative trades to continue without settlements for now, it still leaves unresolved key issues that have raised concerns about India's $1 trillion domestic forex forward market.
Foreign banks have opposed what they say is a lack of clarity on rules regarding defaults by a central counterparty as well as a provision increasing liability limits for clearing of forward contracts of up to 13 months, which comprise the bulk of forward currency trades in India.
The RBI has held several meetings with FEDAI and the banks to reach an agreement, and central bank officials have said they are internally discussing the views from foreign banks.
The RBI's efforts are part of global drive to give clearing houses a key role in bringing more transparency to the trillions of dollars traded every day in over-the-counter derivatives.
(Additional reporting by Archana Narayanan; Editing by Simon Cameron-Moore)
