RBI panel reforms to give India Inc a push
An RBI panel on Friday suggested reforms in the foreign exchange market for liberalising some capital account transactions like foreign currency derivatives.
By TNN |
An RBI panel on Friday suggested reforms in the foreign exchange market for liberalising some capital account transactions like foreign currency derivatives.
The panel suggested that corporates be given greater hedging flexibility, whereby they are allowed to cancel and rebook foreign currency swaps. The proposed move will help corporates which plan to raise funds through the external commercial borrowing (ECB) route.
It also has suggested that companies should be allowed to sell or write in covered call and put options. In other words, if this is accepted corporates would not only be able to buy foreign currency through an option contract by paying premium, they could also act as sellers (like banks) and be option writers. The report prepared by the internal technical group on forex markets has suggested reforms with a medium-term framework.
The panel has also recommended that Indian banks should be allowed to accept deposits from NRIs in more foreign currencies, including the Canadian, Australian and New Zealand dollars. At present, FCNR(B) deposits are accepted only in US dollar, pound sterling, euro and Japanese yen.
The panel recommends that some banks should be allowed to hedge commodity risks for corporates. “Corporates may be permitted to hedge their commodity price risk by entering into price fix hedges to the extent of the average quantity of commodity bought or sold during the previous three years, or during the previous year, whichever is higher. This will be applicable both to commodities imported or exported and procured domestically,” said the report.
Banks, it said, should be allowed to provide capital against their actual open exchange position, rather than their open position limit. It has also said banks may be given the freedom to decide on the period of crystallisation of unpaid export bills.
Besides keeping in view the freight risk incurred by the ship owners and their clients, the central bank panel has recommended that the shipping companies may be permitted to hedge themselves to the extent of their actual physical exposure.
The panel suggested that corporates be given greater hedging flexibility, whereby they are allowed to cancel and rebook foreign currency swaps. The proposed move will help corporates which plan to raise funds through the external commercial borrowing (ECB) route.
It also has suggested that companies should be allowed to sell or write in covered call and put options. In other words, if this is accepted corporates would not only be able to buy foreign currency through an option contract by paying premium, they could also act as sellers (like banks) and be option writers. The report prepared by the internal technical group on forex markets has suggested reforms with a medium-term framework.
The panel has also recommended that Indian banks should be allowed to accept deposits from NRIs in more foreign currencies, including the Canadian, Australian and New Zealand dollars. At present, FCNR(B) deposits are accepted only in US dollar, pound sterling, euro and Japanese yen.
The panel recommends that some banks should be allowed to hedge commodity risks for corporates. “Corporates may be permitted to hedge their commodity price risk by entering into price fix hedges to the extent of the average quantity of commodity bought or sold during the previous three years, or during the previous year, whichever is higher. This will be applicable both to commodities imported or exported and procured domestically,” said the report.
Banks, it said, should be allowed to provide capital against their actual open exchange position, rather than their open position limit. It has also said banks may be given the freedom to decide on the period of crystallisation of unpaid export bills.
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Besides keeping in view the freight risk incurred by the ship owners and their clients, the central bank panel has recommended that the shipping companies may be permitted to hedge themselves to the extent of their actual physical exposure.
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