What is an Inside/ Outside Swap?
CCIL has been considering various options for reducing the number of rejections on account of exposure violations of member banks with a view to minimize operational and systemic risk. In order to reduce the rejection on account of exposure violations CCIL has introduced I/O Swap on Cash, Tom & Spot basis. The Swap deal consists of two FX transactions which are equal and opposite, both being agreed at the same time as part of single swap. One leg of the Swap will be settled inside the CCIL system and one leg will have to be settled by the bank with the respective counterparty outside the CCIL system. This approach will help ensure settlement of all inter-bank deals within CCIL by bringing about a reduction in banks’ settlement exposure. It will also leave the members FX positions unchanged with a neutral exchange rate. The choice whether to enter into such a swap or not is up to the bank and CCIL’s role here is merely to facilitate the transaction by advising the interested bank the na
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