RBI in its slack season credit policy '97 allowed the authorized dealers to arrange currency swap without its prior approval. This was to enable those requiring long-term forward cover to hedge themselves without altering the external liability of the country.
Prior to this policy RBI had been approving rupee foreign currency swaps between corporates on a case basis, but no such swaps were taking place.
RBI in its process of making the Indian corporates globally competitive has simplified their access to this instrument by making changes in its credit policy. But despite an easing regulation, swaps have not hit the market in a big way.
India has a strong dollar-rupee forward market with contracts being traded for one, two, six-month expiration.
Daily trading volume on this forward market is around $500 million a day. Indian users of hedging services are also allowed to buy derivatives involving other currencies on foreign markets.
Outside India, there is a small market for cash –settled forward contracts on the dollar –rupee exchange rate.
While studying swaps in the Indian context, the counter parties involved are Indian corporates and the swap dealers are the Authorized dealers of foreign exchange, i.e., the banks allowed by RBI to carry out the swaps.
These banks form the counterparty to the corporates on both sides of the swap and keep a spread between the interest rates to be received and offered.
One of the currencies involved is the Indian rupee and the other could be any foreign currency. The interest rate on the rupee is most likely to be fixed, and on foreign currency it could be either fixed or floating
Prior to this policy RBI had been approving rupee foreign currency swaps between corporates on a case basis, but no such swaps were taking place.
RBI in its process of making the Indian corporates globally competitive has simplified their access to this instrument by making changes in its credit policy. But despite an easing regulation, swaps have not hit the market in a big way.
India has a strong dollar-rupee forward market with contracts being traded for one, two, six-month expiration.
Daily trading volume on this forward market is around $500 million a day. Indian users of hedging services are also allowed to buy derivatives involving other currencies on foreign markets.
Outside India, there is a small market for cash –settled forward contracts on the dollar –rupee exchange rate.
While studying swaps in the Indian context, the counter parties involved are Indian corporates and the swap dealers are the Authorized dealers of foreign exchange, i.e., the banks allowed by RBI to carry out the swaps.
These banks form the counterparty to the corporates on both sides of the swap and keep a spread between the interest rates to be received and offered.
One of the currencies involved is the Indian rupee and the other could be any foreign currency. The interest rate on the rupee is most likely to be fixed, and on foreign currency it could be either fixed or floating