The finance ministry is keen that the non-deliverable forward (NDF) contracts be shifted to India where the government has regulatory jurisdiction over it, reports CNBC-TV18’s Aakansha Sethi. The move comes as the positions taken in the NDF markets abroad were seen to be as one of the prime reasons for the weakening of the currency.
There are pros and cons to this argument because it could lead to more speculation in the currency but at the same time it will be speculation which will be within the government's jurisdiction. Hence, the government is looking at various steps.
The key objective of this exercise is to broaden and deepen the currency markets and for this the government wants to increase liquidity in the markets. Hence, it is considering reversing some of the steps that the RBI had taken on July 8.
Sebi had limited positions that clients and brokers could take. For clients it was restricted to 6 percent of open interest or USD 10 million, whichever was lower and for brokers it was limited to 15 percent of open interest or USD 50 million, whichever was lower.
The finance ministry is working along with RBI and Sebi to see if the participation of banks and other financial institutions in currency derivative markets can be increased by reversing some of these measures.
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