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Current Affairs

Usha Thorat panel suggests liberal currency market for offshore users

Date: 09 August 2019 Tags: Monetary Policy & RBI

Context: The task force on offshore rupee markets, headed by former Dy. Governor Usha Thorat, has submitted its report to the RBI

 

Recommendations:

  • It has suggested for extending trading hours to improve access of overseas users and allowing Indian banks to freely offer prices to global clients around the clock. 
  • Allow users to undertake foreign exchange transactions up to $ 100 million in OTC currency derivative market without the need to establish underlying exposure.
  • Enable rupee derivatives (settled in foreign currency) to be traded in the International Financial Services Centres (IFSC) in India.
  • To facilitate non-residents to hedge their foreign exchange exposure onshore, the task force recommended establishing a central clearing and settlement mechanism for non-resident transactions in the onshore market.
  • Align the tax treatment with global standard

Significance of the off shore rupee market:

  • The offshore rupee market has been making a larger impact on the local currency market helping with better price discovery and driving volatility, prompting RBI to look for ways to ensure greater stability for the rupee.