RBI mulling to bring back ‘exotic currency derivatives’, India Inc has some suggestions

The Reserve Bank of India (RBI) Governor Shaktikanta Das is mulling the idea of bringing back ‘exotic currency derivatives’ product after staying away from it for almost a decade. This has got everyone back to their discussion table (after dollar-rupee swap tool) to debate it. The captains of commerce in India suggest that there is always scope for innovation to multiple gains or boost profits in the free market but suggest not without strict guidelines and proper caution.

Speaking on the RBI expected move BK Goenka, President at ASSOCHAM told Zee Business online, "Assocham suggest that as Securities and Exchange Board of India (Sebi) has suggested a few riders way back in 2014 for trading in currency derivatives space should be followed to safeguard the interests of the parties involved like putting a limit or ceiling on gross open position across all contract against the total open interest. The sectoral regulators should monitor the participation of domestic institutional investors in the exotic currency derivatives segment." BK Goenka of ASSOCHAM said that in the free economy, there is always scope for innovation to multiple gains or boost profits in the free market but we suggest not without strict guidelines and proper caution.

See Zee Business video below:

#ResearchGurukul | निवेश से पहले कंपनी के बिजनेस मॉडल को समझना कितना है जरूरी? जानिए पैंटोमैथ AMC के फंड मैनेजर वरिंदर बंसल से अनिल सिंघवी के साथ।

पूरा कार्यक्रम देखें: https://t.co/M7XsdtaFH0@AnilSinghviZEE @varinder_bansal pic.twitter.com/FRZAjUnW2K

— Zee Business (@ZeeBusiness) April 3, 2019

The thinly traded currency derivatives are a very attractive but highly risky tool to earn extra earning on exchange rates and offset loan costs. However, corporate and banks have burnt their fingers with this product in 2008 when bets on currencies backfired as the exotic currencies like Yen, Swiss franc and Euro surged leaving behind lengthy court battles and bitter taste.