RBI to relax norms for forex futures after rupee stabilises

H R Khan says will look at whole gamut of futures market

Reserve Bank today said it will look at easing restrictions on the forex futures market once stability improves in the foreign exchange market.

"Once the stability improves in forex market, we will look at the whole gamut of futures market," RBI Deputy Governor H R Khan said on the sidelines of an event here.

During the morning session, the rupee fell by 21 paise to 61.65 against the dollar due to demand from importers for the US currency.

The local currency had hit an all time low of 68.85 against the dollar on August 28.

"As things stabilise, we will look at more and more relaxations. For examples, in OTC (Over-the-Counter) market, there is requirement of documentations for the underlying. For up to certain small values, we may think that documentation requirement (such cases) can be done away with," he said.

Khan said RBI is in talks with Securities and Exchange Board of India (Sebi) on making the dollar-rupee OTC and futures market trades possibly on a delivery basis.

"Going forward, the best idea is to harmonise both OTC and futures market, both can possibly be delivery-based. We are in discussion with Sebi and going forward will look at this," Khan added.

Asked how long the dollar window for oil companies would continue, Khan said, "We have said November 30 or before that. We will take a call."

In August, RBI had opened a special window to help the three state-owned oil marketing companies needing about $8.5 billion every month to meet their foreign exchange requirement in a bid to check the rupee's free fall.

The PSU oil companies are the biggest buyers of dollars, requiring $8-8.5 billion every month for the import of an average 7.5 million tonnes of crude oil. The RBI decision is aimed at curbing volatility in the forex market.

Under the swap facility, it "sells/buys USD-INR forex swaps for fixed tenor with the oil marketing companies through a designated bank."

On the inflow of funds in FCNR and NRE accounts, he said $5.7 billion has been received as of last Friday.

Terming current account deficit (CAD) and fiscal deficit as a concern, Khan said CAD is expected to be much lower than in the last fiscal.

India's CAD was at 4.8% of GDP during the last fiscal and in value term it was $88.2 billion.

"We have seen current account deficit improving, exports are improving and imports as measures have been taken (to curb) gold (import) and we hope going forward, current account deficit will be much lower than last year's level... We have the basic drivers of growth whether in terms of demographic dividend or savings," he said.

"We have some concerns about the fiscal deficit. Fortunately, the government has maintained not to go beyond the lakshman rekha... As every dark cloud has some silver lining, we have some silver linings," he added.

Noting that there are some structural factors, Khan said, "the current account deficit and fiscal deficit have been aggravated because of global slowdown for exports, which is more unavoidable perhaps."

Despite growth slowdown, he said, imports have continued to grow partly because of oil imports and gold demand in the country.