On Monday, the Reserve Bank of India (RBI) said it has permitted category-I local banks to offer foreign exchange prices to users at all times, out of their Indian books, either by a domestic sales team or through their overseas branches. The step has been taken to lower the influence of offshore trading in the domestic currency markets.
"Authorised dealers may undertake customer (persons resident in India and persons resident outside India) and inter-bank transactions beyond onshore market hours. Transactions with persons resident outside India, through their foreign branches and subsidiaries may also be undertaken beyond onshore market hours," said RBI's notification.
RBI said that the decision is based on a recommendation of the Task Force as announced in Statement of Developmental and Regulatory Policies dated October 04, 2019.
In October, RBI said that it would be implementing at least two recommendations from a committee headed by former Deputy Governor Usha Thorat, on ways to counter the shift in trading volumes from local currency markets to offshore centres.
Increased offshore trading had raised demands for extending trading hours as it will help currency trader hedge their bets locally. Many derivative products were moved out of India as most of the hedging was done overseas.
A survey by the Bank of International Settlements released in September 2019 showed that the average daily volume of rupee trading the UK was at $46.82 billion, which far exceed India's $34.49 billion volume.