RBI increases exposure limits for residents, foreign investors

The Reserve Bank of India (RBI) has increased the exposure limits for residents and FPIs in the exchange traded currency derivatives (ETCD) market.

“It has now been decided to permit persons resident in India and FPIs (foreign portfolio investors) to take positions (long or short), without having to establish existence of underlying exposure, up to a single limit of $100 million equivalent across all currency pairs involving rupee put together, and combined across all exchanges,” RBI said in a notification.

Currently, persons resident in India and FPIs are allowed to take a long (bought) or short (sold) position in US dollar-Rupee pair for up to $15 million per exchange without having to establish existence of underlying exposure.

RBI had increased the exposure limit for FPIs for the US dollar-Rupee pair from $10 million to $15 million in March 2015. FPIs were allowed to take long (bought) as well as short (sold) positions in Euro-Rupee, Pound Sterling-Rupee and Japanese Yen-Rupee pairs, all put together, up to $5 million equivalent per exchange.

“The onus of complying with the provisions of this circular rests with the participant in the ETCD market and in case of any contravention the participant shall be liable to any action that may be warranted as per the provisions of Foreign Exchange Management Act, 1999 and the regulations, directions, etc. issued thereunder,” RBI stated. “These limits shall also be monitored by the exchanges, and breaches, if any, may be reported to the Reserve Bank of India,” it said. #casansaar (Source - Times of India)