RBI curbs widen dollar-rupee forwards-NDF spread
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains·
Why in news
The RBI banned banks from offering Non-Deliverable Forward (NDF) contracts involving the rupee to both resident and non-resident users to curb speculative currency trading.
Background
The RBI's move follows a week of restrictions on open positions in the onshore deliverable market. The rupee closed at 93.10 against the dollar following the announcement, up from a previous close of 94.83.
Facts for Prelims
- BodyRBI: The central bank responsible for regulating the NDF market and onshore deliverable market.
- FactThe rupee closed at 93.10 against the dollar immediately following the RBI's announcement.
- FactThe previous close of the rupee against the dollar was 94.83.
For Mains
Q. Discuss the role of the Reserve Bank of India in managing currency volatility and the implications of curbing offshore speculative markets on the stability of the Indian Rupee.
Dimensions to cover in your answer
- Market integrity: Curbing speculative volatility in offshore NDF markets to protect onshore currency stability.
- Monetary policy transmission: Balancing the need for market liquidity with the prevention of excessive currency depreciation.
Keywords: Currency Volatility · Speculative Trading · Monetary Policy · Exchange Rate Stability · Non-Deliverable Forward
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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.