An Indian task force, set up the country’s reserve bank, has called for some major reforms to India’s currency trading laws.
Set up in February and led by Usha Thorat, a former deputy governor of the Reserve Bank of India, the task force’s goal was to try and bring offshore trading in the rupee back to Indian financial institutions.
One of its key recommendations is to allow rupee-based derivative products, that will be settled in foreign currencies, to be traded in Indian financial centers.
The task force also suggested that Indian financial authorities extend market hours for trading so that offshore traders, operating in different time zones, will have better access to the Indian currency market. Banks and other financial institutions, the task force’s report said, could also start offering pricing to clients twenty-four hours a day.
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Alongside those recommendations, Thorat and her team said that regulators should allow traders to make orders of up to $100 million, in the over-the-counter derivatives markets, without having to establish underlying exposure.
The report put out by the task force also says that a central clearing and settlement mechanism should be set up for non-resident transactions in the onshore Indian market.
India currently has extremely restrictive foreign exchange trading laws. Non-residents and foreign investors, for example, are banned from trading in the country’s currency derivative markets.
Indians are also fairly restricted in what they can. Retail trading is effectively banned, even though many brokers try to attract clients in the country. Traders can also only trade in options and futures, and all trades are settled in rupees.