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Currency futures trading has received a boost from the RBI. On Wednesday, the RBI raised the position limit for trading in currency derivatives on stock exchanges, for both resident and non-resident Indians, to $100 million across currency pairs.
Earlier, the limit was $15 million per exchange for dollar-rupee pair, which is the most active contract in the segment.
Offshore destinations like the DGCX of Dubai and SGX of Singapore have emerged as the top rivals to domestic exchanges for trading in the Indian rupee.
Experts said the RBI’s move will add some lustre to Indian exchanges, which have less leverage compared to offshore destinations due to tax arbitrage.
Tax and other statutory costs for trading in the DGCX and the SGX are much lower than in India, making them hot destinations to trade Indian assets, including currency and stocks.
“It is now proposed to merge these position limits across all foreign currency-rupee pairs and provide a single limit of $100 million per user (both resident and non-resident) across all exchange-traded currency derivatives, in all exchanges combined,” the RBI said in the policy statement.
Currently, the limit is $5 million per exchange for other currency pairs, including the euro, yen and sterling, with the rupee.
“Easing of norms by the RBI could bring some incremental volumes, but may not be enough to curb offshore trading of the rupee,” a research head at a Mumbai-based brokerage house said.
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