The Reserve Bank of India (RBI), India’s central banking institution, proposes a major reform on the India’s currency trading laws.
A special task force set up by the bank back in February, wants to bring offshore trading in Indian rupees back to the local banks and brokers.
A key recommendation by the task force is rupee based derivative instruments, settled in foreign currencies, to be allowed for trade at Indian banks and other financial institutions.
The suggestions also call for an extension of the trading hours so that offshore traders, from different time zones, to have better access to the Indian forex market. In fact the task force wants the banks and the rest of the financial institutions to offer pricing to clients twenty four hours a day.
Another key suggestion is for traders to be allowed to make orders of up to 100 million USD, in the over the counter derivatives markets, without being obliged to establish underlying exposure.
The task force also calls for the creation of a central clearing and settlement mechanism for non-resident transactions in the onshore Indian market.
Currently India has extremely tough foreign exchange trading laws. If you are not Indian for example, you are not allowed to trade in the country’s currency derivative markets.
Also retail forex trading in practice is banned and traders are allowed to trade only in options and futures settled in rupees.