The Reserve Bank of India i.e. RBI has withdrawn some restrictions imposed on foreign exchange dealers (Forex Dealers) on April 20 to prevent the volatility of the rupee. Now dealers will be able to take positions again in the offshore non-deliverable forward market (NDF). A few days before RBI took this step, Governor Sanjay Malhotra had indicated that these restrictions would not remain in force indefinitely. The central bank has clarified that authorized dealers will no longer need to be prevented from offering non-deliverable derivative contracts linked to the rupee to resident or non-resident users. Rebooking of contracts also allowed: According to the new rules, banks can now allow users to rebook any foreign exchange derivative contract related to the rupee. This decision has come into effect with immediate effect. However, RBI has clarified that authorized dealers will not be allowed to enter into foreign exchange derivative contracts in rupees with related parties. Some exemptions for old contracts retained In the case of related parties, the exemption is limited only to cancellation or rollover of existing contracts and back-to-back transactions made with non-related, non-resident users. Additionally, banks will have to limit their net open positions in the onshore deliverable rupee market to USD 100 million ($100 million) at the end of each trading day. Why was the ban imposed in March? In late March, Brent crude prices crossed $100 per barrel as the US-Iran war worsened. Due to this, the rupee was falling towards its record low level, to stop which the central bank had taken many strict steps. By April 10, banks had liquidated approximately $40 billion of speculative trades in the offshore NDF market. Status of the rupee and future strategy: After these strict steps by RBI, the rupee has recovered from the record low of 95.21 against the dollar. Governor Malhotra had said in his bi-monthly policy review that these measures were temporary. He said that speculative positions were seen forming in the arbitrage market in March, which needed to be curbed to prevent excessive volatility. What is NDF market? Non-deliverable forward (NDF) is a foreign exchange derivative contract used for currencies that are not fully traded internationally. In this, only cash is settled in the end. RBI’s target: Removing these restrictions reflects RBI’s commitment towards deepening the internationalization and markets of the Indian currency. Also read this news… Sensex rose 27 points and closed at 78,520: Nifty gained 11 points, buying in banking and auto shares showed a slight rise in the stock market today i.e. Monday, April 20. Sensex closed at 78,520 with a gain of 27 points. There was a gain of 11 points in Nifty, it closed at the level of 24,365. Today there was buying in banking, media and auto shares. Out of 30 Sensex stocks, 18 declined and 12 gained. Read the full news…
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RBI lifts restrictions on rupee trade: Now Forex dealers will be able to take positions in the NDF market; There was a ban in March
