Amid the rupee touching nearly 9-month low against the U.S. dollar, the Reserve Bank of India (RBI), on Friday said it would continue to take steps to check excessive volatility in the currency market.
“Reserve Bank will continue to manage the exchange rates as hitherto, targeting on curbing excessive volatility rather than any specific levels,” RBI Executive Director G. Padmanabhan said at the 8th annual conference of the Foreign Exchange Dealers’ Association of India here.
The rupee dropped to nearly 9-month low of 56.01 to the dollar on Thursday. However, it closed at 55.62 on Friday.
Mr. Padmanabhan said India’s central bank had decided to relax norms for exporters.
The RBI plans to allow exporters and importers to rebook and cancel up to 50 per cent of their total hedged exposure from the present cap of 25 per cent.
“We have decided in principle to relax a few things that we hope will cheer the market. The facility of rebooking of cancelled contracts is being increased from the present limit of 25 per cent to 50 per cent, and made symmetrical for both exporters and importers,” Mr. Padmanabhan said.
Further, he said, the documentation for booking of forward contracts up to $200,000 was also being simplified.
“Let me hasten to add that these facilitations have nothing whatsoever to do with RBI’s perception about the exchange rate as some of practitioners had reportedly believed or stated when we relaxed the restriction on net open position limits of banks,” he said.
Mr. Padmanabhan said the rupee was not fully convertible at this stage.
“While the current account has been made fully convertible, we have consciously followed a calibrated approach towards capital account convertibility,” he said.
Despite showing increasing trends during last few years, he said, India still accounted for a very small proportion of the global foreign exchange market turnover.
“Though rupee invoicing is permitted under extant FEMA regulations, almost the entire bulk of international trade in India continues to be denominated in the U.S. dollars (the share of dollar invoicing in exports and imports during quarter ended December 2012 stood at 90 per cent and 83.6 per cent, respectively),” he said.
To promote rupee invoicing for trade-related transactions, he said, the RBI had taken steps in recent times.
Non-resident importers and exporters have been allowed to hedge their currency risk in respect of exports from and imports to India, invoiced in Indian rupees by availing the facility either directly from authorised dealer banks in India or through their banks located in their country.
