Homeeconomy News

    RBI permits banks to trade in offshore rupee derivative market in order to contain volatility

    RBI permits banks to trade in offshore rupee derivative market in order to contain volatility

    RBI permits banks to trade in offshore rupee derivative market in order to contain volatility
    Profile image

    By CNBC-TV18  IST (Published)

    Mini

    The central bank has also permitted the banks to deal in offshore non-deliverable rupee derivative markets. 

    With the national lockdown, the Street was quite expecting the central bank to cut rates in order to boost the economic situation. In a major announcement today, the RBI slashed repo rate by 75 bps and reverse repo rate by 90 bps. Another less talked-about relief by the central regulator was allowing all banks to deal in offshore rupee derivative markets.
    At present, the Indian banks are not allowed to participate in this market. However, with coronavirus impact on the banking system, the RBI saw it deemed fit to allow all banks dive into the offshore NDF rupee market in order to contain the volatility in the domestic currency.
    This week, the rupee breached the 75-mark against the US dollar. The current economic slowdown and volatility are affecting the currency market, dragging rupee to its lifetime low levels.
    According to the RBI's press release, "Accordingly, it has been decided, in consultation with the Government, to permit banks in India which operate International Financial Services Centre (IFSC) Banking Units (IBUs) to participate in the NDF market with effect from June 1, 2020."
    The measure is aimed at improving depth and price discovery in the forex market segments by reducing arbitrage between onshore and offshore markets, said RBI Governor Shaktikanta Das.
    It also directed that the banks can participate through their Indian branches/ foreign branches or through their IBUs.
    Also, the central regulator in a major move allowed banks to suspend repayments on all term loans for 3 months.
    arrow down

      Market Movers

      View All
      CompanyPriceChng%Chng