Nomura Asia Insight India: RBI Activates a Second Line of Currency Defense
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Key Views
- The RBI barred rebooking of cancelled INR derivative contracts and cut the threshold for trades without underlying exposure from USD100mn to USD5mn.
- Under the FERR, authorized dealers must hold INR-equivalent funds equal to 20% of notional value on contracts above USD2mn.
- From October 12, USD will be sold via designated banks to three major public-sector OMCs to meet their full daily needs; India's monthly oil import bill averaged USD16.4bn during April–August, with these OMCs accounting for about 55%.
Outlook
Policy success hinges on the global macro environment. If conditions do not improve, more difficult policy choices and a broader toolkit spanning currency flexibility, fiscal-liquidity-monetary measures and structural reforms may be needed.
Recommended Securities
None specified in the report.
Key exhibits
Exhibit 1
