The Reserve Bank of India has introduced several measures and regulatory developments aimed at improving financial market functioning, managing foreign exchange exposure and strengthening liquidity management. The central bank has constituted a Technical Consultative Committee for Financial Markets to provide advice on developments in money markets, government securities, foreign exchange and derivatives.
The committee will be chaired by the RBI Deputy Governor in charge of the Financial Markets Regulation Department. It will include external members and is expected to meet at least once every quarter. Its focus will include improving market efficiency, liquidity, resilience and financial market infrastructure.
Corporate Dollar Forward Purchases Decline After RBI Measures
Corporate forward dollar purchases declined 35% in October to $49.5 billion, following RBI measures introduced to manage speculative positions in the foreign exchange market. The measures included a 20% interest free cash reserve requirement against certain rupee derivative positions and restrictions on rebooking cancelled contracts.
The decline indicates a reduction in corporate forward dollar activity following the regulatory changes. The RBI’s measures are aimed at improving market discipline and limiting excessive positions in the foreign exchange derivatives market.
Banking System Liquidity Remains in Surplus
Banking system liquidity surplus approached ₹2 lakh crore on November 2. The overnight call money rate stood at 5.45%, below the RBI’s 5.50% repo rate. In a variable rate reverse repo auction, banks offered ₹23,905 crore against the RBI’s notified amount of ₹50,000 crore. The central bank accepted bids at 5.49%.
Separately, the RBI simplified certain FEMA rules relating to service exports and imports, with changes effective retrospectively from October 1. The revised framework includes deemed Export Declaration Form filing for resident individuals and reporting relief for companies and limited liability partnerships undertaking remittances of up to ₹10 lakh.
What is the RBI Technical Consultative Committee for Financial Markets?
It is a committee established to advise the RBI on developments in money markets, government securities, foreign exchange and derivatives.
Why did corporate dollar forward purchases decline?
Purchases declined following RBI measures requiring cash reserves against certain derivative positions and restricting the rebooking of cancelled contracts.
What was the banking system liquidity surplus?
The banking system liquidity surplus approached ₹2 lakh crore on November 2.
