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GOVERNMENT POLICIES

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GOVERNMENT POLICIES
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Sunanda K. Chavan
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GOVERNMENT POLICIES - October 8th, 2010

The Rupee as an International Currency
Two - way quotes for Rupee in the International Markets - on hold
Presently, Authorized Dealers are only allowed to sell Spot Rupees to overseas banks, but are not allowed to buy Rupees freely in the international market.


A view was expressed that two - way prices for the Rupee be allowed to be quoted by banks in India in overseas markets. It was felt that in view of the current regulations on maintaining excessive balances in Vostro Accounts and prohibition on overdrafts in Vostro Accounts, the Rupee is unlikely to be traded extensively in the international markets.

Two - way prices for the Rupee in the International markets is a desirable long term objective. Perhaps the time is not opportune for such a move.
Forward Cover for NRIs and FIIs


Currently, forward cover facilities are not available for NRIs and FIIs. Although offering forward cover facilities to FIIs may expand the forex market, in the current scenario, it may accentuate the demand for USD in the forward market and result in the overshooting of premia.


This facility is not provided in many countries as FIIs are expected to assume the currency risk. This relaxation can await introduction of convertibility of the Rupee on the Capital Account. However, a view was also expressed by some members that this measure could push up forward premia, thereby benefiting the exporters.


NRIs maintain two types of accounts in India - FCNR Accounts and Rupee Accounts. NRIs carry exchange risk on their Rupee balances with banks in India and offering them facility for forward cover will again accentuate demand for USD in the forward market.


As most of the balances in Rupee accounts represent savings of NRIs, unlikely to be repatriated, it is recommended that this proposal may also await introduction of convertibility of the Rupee on the Capital Account
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Rose Marry
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Re: GOVERNMENT POLICIES - April 18th, 2016

Quote:
Originally Posted by sunandaC View Post
The Rupee as an International Currency
Two - way quotes for Rupee in the International Markets - on hold
Presently, Authorized Dealers are only allowed to sell Spot Rupees to overseas banks, but are not allowed to buy Rupees freely in the international market.


A view was expressed that two - way prices for the Rupee be allowed to be quoted by banks in India in overseas markets. It was felt that in view of the current regulations on maintaining excessive balances in Vostro Accounts and prohibition on overdrafts in Vostro Accounts, the Rupee is unlikely to be traded extensively in the international markets.

Two - way prices for the Rupee in the International markets is a desirable long term objective. Perhaps the time is not opportune for such a move.
Forward Cover for NRIs and FIIs


Currently, forward cover facilities are not available for NRIs and FIIs. Although offering forward cover facilities to FIIs may expand the forex market, in the current scenario, it may accentuate the demand for USD in the forward market and result in the overshooting of premia.


This facility is not provided in many countries as FIIs are expected to assume the currency risk. This relaxation can await introduction of convertibility of the Rupee on the Capital Account. However, a view was also expressed by some members that this measure could push up forward premia, thereby benefiting the exporters.


NRIs maintain two types of accounts in India - FCNR Accounts and Rupee Accounts. NRIs carry exchange risk on their Rupee balances with banks in India and offering them facility for forward cover will again accentuate demand for USD in the forward market.


As most of the balances in Rupee accounts represent savings of NRIs, unlikely to be repatriated, it is recommended that this proposal may also await introduction of convertibility of the Rupee on the Capital Account
Hello Sunanda,

Here I am sharing Analytical Study on Indian Currency Rupee Depreciation against the Us Dollar and Its Economic Impact, so please download and check it.
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