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The Economic Times

RBI panel proposes extension of forex market timing

MUMBAI: An internal working group at the Reserve Bank of India (RBI) has recommended extending trading hours for both currencies and short-term loan products, citing the need to integrate with global exchanges.

The special central bank committee has suggested extending the Over-the-Counter forex exchange-traded currency derivatives markets to 9 PM instead of 5 PM now. In the money markets, trading is proposed to be stretched by an hour.

The draft report, if accepted, should help increase market volumes, drawing more overseas participants.

“Gradual integration of the Indian economy with the global economy and increased interest of foreign investors in Indian markets aided by a liquid USD/INR forex market have led to growing volumes in rupee trades in the offshore markets,” the committee said in the RBI draft report.

Volumes in the offshore currency futures markets have steadily increased during last 3-4 years vis-à-vis on-shore exchanges, it said.

The market share of domestic exchanges in US dollar and rupee futures has come down from about 74 percent in 2014-15 to 56 percent in 2018- 19.

Money market trading hours may also be stretched. The inter-bank call money market, which now operates between 9AM and 5PM, is proposed to be closed at 6PM.

“The group has recommended extension of timings for both collateralised and uncollateralised segments of the money market,” the committee said.

The repo market, which now closes at 2.30 PM, may extend by another hour. The repo is the rate at which banks borrow from the central bank.

The group has also recommended that the settlement time of primary auction or Open Market Operation be shifted to around 4 PM from around noon.
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