Reserve Bank of India (RBI) Panel’s recommendations on currency futures

The RBI panel proposes the introduction of trading in currency futures
to facilitate market partakers to better manage the applicable risks
in currency.

The Reserves Bank’s in-house working group has recommended setting
up of committed exchanges for currency futures to make sure that regulatory
and supervisory control rests exclusively with the central bank.

The division suggested that once the mechanisms were in place, only
two categories of entities outside India – foreign institutional investors
(FIIs) and non-resident Indians (NRIs) – could be permitted in the market
only as hedgers through nominated banks.

The bank also advocated the obligation of suitable position limits
on FIIs and NRIs. In the preliminary stage the group has suggested that
a single contract should have a notional value of $1,000 and currency
futures maturing in the first 12 calendar months could be offered fundamentally
to support proper price discovery and retail involvement.

The ownership of the exchanges must be well diversified and the shareholders
and directors must meet the "fit and proper" criteria. Foreign
direct investment (FDI) should not surpass the limits prescribed for
financial infrastructure companies, as in the case of stock exchanges.
Furthermore, no person would be permitted to hold more than 5 per cent