India central bank proposes changes to foreign exchange dealing rules

MUMBAI: India’s central bank has proposed changes to foreign exchange rules that seek to offer authorized market participants greater flexibility to trade across electronic platforms while retaining key risk management limits.

The proposed rules, released after market hours on Tuesday, allow banks to trade on electronic trading platforms outside India. They would also allow banks to utilize surplus foreign currency balances for investments in long term overseas debt instruments issued by a foreign state.

Here are some of the other changes proposed by the central bank:

Authorised dealers may undertake transactions on electronic trading platforms outside India, provided the operator is set up in a country which is a member of the Financial Action Task Force (FATF) and the transaction is regulated by a financial market regulator

Authorised dealers may undertake transactions not involving INR on overseas exchanges provided that the overseas exchange is located in a country which is a member of the FATF and is regulated by a financial market regulator

Authorized dealers to be permitted to use undeployed foreign currency deposits for investments in long-term overseas debt instruments issued by a foreign state whose maturity does not exceed that of the deposit

Wholly owned subsidiaries and joint ventures of authorized dealers incorporated in India would be permitted to undertake non-deliverable FX derivative transactions provided that the subsidiary or joint venture is a banking entity.