Committed to a single global dollar-rupee market: RBI dy guv Sankar

RBI said its curbs on derivative positions are temporary, reaffirming commitment to a unified global dollar-rupee market and long-term rupee internationalisation

The Reserve Bank of India (RBI) is committed to a single global dollar-rupee market and the long-term goal of rupee internationalisation stands, said Deputy Governor T Rabi Sankar on Wednesday.

 

The curbs imposed by the RBI on banks’ open non-deliverable forward (NDF) positions are temporary and aimed at containing excess volatility in the domestic currency, he added.  Rabi Sankar  was speaking during an event to celebrate the 25th anniversary of Clearing Corporation of India Limited (CCIL).

 

“The commitment to having one single global market for the dollar-rupee stands. And secondly, the commitment to internationalisation of the rupee stands. They are there for the long term. All that was done was to address a temporary event that created large volatility in the market. Once that is taken care of, we should be back on track in what we do. Our idea is that any user anywhere in the world who has exposure to rupee risk should be able to access any available product. So, that remains,” Rabi Sankar said.

 

 

However, he did not provide a timeline for how long the $100 million cap on net open positions in the onshore deliverable market for banks will remain.

 

The RBI’s measures resulted in the domestic currency appreciating by over 2 per cent between March 27 and April 20. 

 

Earlier this week, the RBI eased some restrictions on banks’ arbitrage trades in rupee derivatives, partially reversing measures introduced on April 1.

 

The central bank rolled back some curbs that had barred banks from offering rupee-linked non-deliverable forwards.

 

Under the revised rules, banks can now undertake certain related-party transactions, including cancellation and rollover of existing contracts and deals via the back-to-back route. 

 

However, banks remain barred from undertaking all foreign-exchange derivative transactions with related parties, while the $100 million cap on net open positions in the onshore deliverable market, introduced on March 27, continues.

 

Lenders had initially sought relief soon after the directive was issued, but the RBI declined to offer concessions.

 

Banks briefly attempted to offload positions to clients to limit losses, before a subsequent clarification on April 1 prohibited such transfers, requiring positions to be unwound on their own books.

 

“It was a temporary measure. It had to be rolled back sometime,” Rabi Sankar said. “Whether the rupee goes up or down was not the consideration for these measures. Its movement depends on market factors. We have a very deep market,” he added.

 

He said that the RBI intervenes only in cases of excessive and disruptive volatility in the currency.

 

Additionally, Sankar highlighted India’s government securities market as one of the most transparent and liquid, globally. 

 

“I am not aware of any other market which has that degree of transparency,” Sankar said. 

 

Sankar also said the discussion paper suggesting a one-hour delay for account-to-account digital payments above ₹10,000 to curb rising digital frauds is just an “idea” floated by the central bank. The RBI is seeking a feedback, and based on the feedback received, a call will be taken whether to implement it or not. 

 

“We have floated an idea. We want the feedback. If the feedback is negative, we will be happy to take it. We just want the feedback. We thought we will float a few ideas on how to reduce the incidence or the severity of frauds in the system. These are some of the suggestions we have given. None of this is policy yet. We will look at the response and then take a call. Mule hunter is about detecting mule accounts. This is a way to reduce frauds from even happening,” Sankar said. 

 

Other measures include additional authentication by “trusted individuals” for vulnerable users, tighter scrutiny of accounts receiving large credits, and expanded customer-controlled safeguards.