India's latest foreign-exchange curbs have sown confusion among bankers, with some taking a broad interpretation of the cash-margin requirement and holding back on quoting rupee forwards.
Seven bankers Reuters spoke to on Tuesday said they did not plan to quote dollar/rupee forwards, citing the central bank's directive that the cash-margin requirement applies to all rupee derivative transactions. They were concerned that the mandate could potentially extend to interbank transactions.
A person familiar with the central bank's thinking said the interpretation was not correct, clarifying that the cash-margin requirement was not intended to cover interbank transactions.
The central bank did not immediately respond to an email seeking comment.
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New FX curbs sow confusion, bankers await clarity on dealing rupee derivatives
Bankers are interpreting the new foreign-exchange regulations in India broadly, especially regarding cash-margin requirements related to rupee forwards. This cautious approach has made them reluctant to quote dollar/rupee forwards, raising concerns about its impact on interbank transactions. Interestingly, a source mentioned these new requirements do not affect interbank activity. Meanwhile, the…
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