Raghuram Rajan's RBI relaxes intraday foreign exchange trading position limits

Sep 20 2013, 12:05 IST
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Concerned over fall in rupee, RBI had discreetly phoned trading desks in June and urged them to cut their speculative positions in the currency. Concerned over fall in rupee, RBI had discreetly phoned trading desks in June and urged them to cut their speculative positions in the currency.
SummaryRestrictions were relaxed in recent weeks after Raghuram Rajan took over new RBI chief.

The Governor Raghuram Rajan's Reserve Bank of India (RBI) has relaxed intraday foreign exchange trading position restrictions imposed in June on some banks, officials at four banks with direct knowledge of the matter said on Friday.

The restrictions were relaxed in recent weeks after Raghuram Rajan took over as the new RBI chief on Sept 4.

"Banks for over the past few weeks have been given the flexibility to set their own net open (intraday) positions. All banks now can decide on their own based on capital and board mandate," a senior trader at a foreign bank said.

Concerned about the rupee's fall to a record low, the RBI had discreetly phoned trading desks in June and urged them to cut their speculative positions in the currency.

"The restrictions had almost dried up the entire liquidity in the (FX) market. Some banks approached RBI separately and they said banks can set their own intraday limits to some extent," another senior trader said.

However, the central bank has not specified any limits for the intra-day positions, bankers said.

The Indian rupee has risen about 9 per cent since Rajan took charge after falling to a record low of 68.85 to the dollar on August 28.

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