RBI forex curbs on positions of banks, NDFs will not be permanent: Guv

The central bank's recent curbs on position limits of lenders ​and barring them from offering non-deliverable ​forwards, aimed at reining in rupee ‌volatility, will not remain in place indefinitely, Governor Sanjay Malhotra said on Wednesday.

In a post-monetary policy briefing, Malhotra said the central bank had observed heightened volatility in the foreign exchange market in recent weeks, with banks building positions, including arbitrage trades between the onshore deliverable and offshore ‌NDF markets.

In normal conditions, these linkages play an important role in efficient price discovery, which is why the RBI has been trying to broaden access to the NDF market, he said.

 

However, when volatility becomes excessive and ​positions build to levels that may not aid price discovery, ‌authorities take such measures, he said.

He added that the measures were a ​reaction ‌to specific market movements and did not signal any ‌structural change, adding that the central bank remains committed to broadening and deepening ‌these markets ​and to the ​internationalisation of the rupee.

"So obviously these measures are not going to remain in ‌place forever," ​he said.