Banks breach norms in derivative trade

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 Reserve Bank or ED.

Replying to a notice by the Orissa High Court here for an inquiry into the alleged violations of FEMA and other norms in forex derivatives trade, 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. Derivative is a financial contract whose value is derived from the estimated future price of a certain asset, rate or index and act as a hedge or insurance against the underlying risks related to factors such as forex rate movements.

The petitioner Pravanjan Patra, a city-based businessman, has contended that the Central government and Reserve Bank 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.

CBI, which was asked by the court to inquire into the matter, said in its submission that on the basis of responses it received from the Reserve Bank and the Forex Derivatives Consumers Forum, Tirrupur, Tamil Nadu, some violations of FEMA and other regulations were made in the forex derivative contracts signed by various banks.