From mint · Subhana Shaikh · · 1m 30s
Banks seek RBI forex clarity amid operational hurdles
Banks demand RBI guidance on new forex rules to avoid customer cost disputes.
In brief
Banks demand RBI guidance on new forex rules to avoid customer cost disputes. Banks request RBI clarification on operational aspects of forex curbs to resolve customer cost issues. Originally reported by mint.
Banks approach RBI for forex rule clarity
Banks have approached the Reserve Bank of India seeking operational guidance on new forex curbs to curb speculative activity and support the rupee.
New forex rules require 20% cash FERR
Under the new rules, authorised dealer banks must maintain a cash FERR with the RBI equivalent to 20% of the rupee value of each foreign exchange derivative contract with notional value exceeding $2 million.
Banks flag operational challenges
Banks seek clarity on calculating notional value for complex options strategies and whether the $5 million threshold applies to imports or exports.
Customer cost uncertainty
Banks are unsure whether they can charge customers for the reserve requirement based on transaction duration or incorporate costs into pricing.
RBI's other measures
The RBI banned rebooking cancelled forex derivative contracts and opened a special window for oil marketing companies to meet dollar requirements.
Economist warns of limited effectiveness
An economist noted the measures may provide near-term relief but effectiveness will be limited unless underlying balance of payments vulnerabilities are addressed.
Rupee gains 1% amid uncertainty
The rupee gained 1% on Monday to 95.5938 per dollar, marking its biggest single-day gain in more than eight months.
The big picture
Banks request RBI clarification on operational aspects of forex curbs to resolve customer cost issues.
