The Reserve Bank of India (RBI) Governor Shaktikanta Das on April 6 said it has proposed to permit banks with IFSC Banking Unit (IBU) to offer non-deliverable foreign exchange derivative contracts to residents.
"This measure will further deepen the forex market in India and provide enhanced flexibility to residents in meeting their hedging requirements," Das said during the announcement of the April Monetary policy.
Banks in India with IFSC Banking Unit (IBU) were earlier permitted to transact in Indian Rupee non-deliverable foreign exchange derivative contracts with non-residents, banks and other eligible banks having IBUs.
A non-deliverable forward contract allows two parties to lock in exchange rate for a period of time.
The RBI said in a release that these banks will have the flexibility of settling their Non-deliverable foreign exchange derivative contracts (NDDC) transactions with non-residents and with each other in foreign currency or in Indian rupee while transactions with residents will be mandatorily settled in Indian rupee.
They further added that related directions are being issued separately.
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