New Delhi (Agencies): Revising the guidelines for foreign exchange business, the Reserve Bank today asked banks dealing in forex to set up a comprehensive risk management procedure for trading as well as non-trading activities.

"Banks should have a comprehensive and adequate risk management procedure covering both trading and non-trading activities...Such a procedure will assist in limiting and monitoring risk taking activities," RBI said in revised guidelines for 'Internal Control Over Foreign Exchange Business'.

The central bank has also advised the Authorised Dealer (AD) banks to tape conversations in the dealing rooms.

"The tapes may be preserved for at least two months and where a dispute has been raised, until the issue is resolved. Access to the equipment and tapes should be subject to strict control," it said.

RBI has also asked the banks to set the limits form inter-bank business as well as transactions in overseas markets.

"The limits when exceeded should be promptly reported to appropriate senior management and got approved," it said, adding the procedure would help in exercising control over the forex business and contain risks.

Asking the banks to strengthen concurrent audit mechanism, the RBI said that minor irregularities in forex trading should be rectified immediately and the serious ones should be reported to the controlling authorities for action.

The RBI has also asked the ADs to segregate their operations into dealing room; risk management; and settlement and reconciliation of accounts.

The AD banks, RBI said, should ensure that brokers should not take over the functions of dealers.

"Complaints relating to malpractices by brokers should be promptly brought to the notice of the Foreign Exchange Dealers Associations of India, Mumbai," it said.

The internal control guidelines were initially framed by the RBI in 1981 and were revised in 1996.

RBI said they are being revised again in view of rapid changes in the global and domestic forex markets and developments in the field of information technology, and introduction of forex derivatives trading.