FEDAI rules: Interest/Swap charges in case of Substitution/Change in Tenor of a bill

The 10th edition of FEDAI Rules came in force from 01 April 2019. As per the guidelines FEDAI rule no.2.4, if the Authorised Dealer accepts change in the tenor of Usance bill, in such cases, the Bank shall recover/pay notional swap difference for the relative cover. In case of early delivery of “Optional Delivery Date Forward Contract” interest on inlay/outlay of funds should be calculated up to the date for which the Swap is done, on account of early delivery. However, it is optional for banks to accept the delivery of bills under a contract made for the purchase of a clean TT.
Authorised Dealer could charge interest to the customer as per internal guidelines of the respective banks in case of a change in the usance of a bill. Bank may further charge or pay a notional swap difference. Interest in outlay/inflow of funds for such swaps shall also be recovered/paid by the bank for the purpose of arranging swap. This is in addition to the swap cost in case of early delivery of a contract. The fund’s outlay/ inflow shall be arrived at by taking the difference between the original contract rate and the rate at which the swap could be arranged. If a swap leads to inflow of funds, interest shall be paid to the customer. On the other hand, if a swap leads to outflow of funds interest shall be recovered from the customer. The rate of interest to be recovered/ paid and the threshold limit for the same may be as per the bank’s internal policy in this regard.

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