RBI curbs speculation and hikes cash reserve for rupee hedges
The Reserve Bank of India (RBI) just rolled out new rules for certain currency contracts, hoping to steady the falling rupee.
From now on, overseas clients can only use these contracts to protect themselves from currency swings, not for speculation.
The RBI also expanded its 20% cash reserve rule, so banks have to set aside more money when dealing with rupee hedges.
Banks must verify nonresident hedges
The rupee has been struggling lately thanks to high oil prices and investors pulling money out of India.
With these changes, banks with units in India's International Financial Services Centre and some primary dealers must double-check that nonresidents are really just hedging their risks.
Plus, banks now have to keep a daily cash reserve with the RBI until contracts mature.
The move already helped the rupee bounce back 1% after a rough year.