RBI relaxes position limits in exchange-traded currency derivatives market

The Reserve Bank of India (RBI) has revised guidelines so as to provide greater flexibility to both foreign portfolio investors (FPIs) and domestic participants in the exchange traded currency derivatives (ETCD) market.

RBI has increased the limit for domestic entities and FPIs to take foreign currency positions in the dollar-rupee pair on ETCD market without having to establish the existence of any underlying exposure to $15 million per exchange. Also, the aggregate limit for positions across euro-rupee, pound-rupee, yen-rupee pairs have been fixed at $5 million.

RBI also increased the limit for domestic importers of goods and services to take hedging positions in ETCD markets from 50 per cent to 100 per cent of the higher of the average of their last three years' imports turnover or the previous year's turnover.

Documentation and other administrative requirements for hedging on the ETCD markets have also been rationalised.

Based on the experience, the RBI said it will decide on participation of non-resident Indian (NRIs) in the ETCD markets in future.

TBI had, on 3 February 2015, announced the relaxations as part of its sixth bi-monthly monetary policy statement for the 2014-15 financial year.