RBI scraps NDF ban, permits rebooking of canceled FX contracts
The Reserve Bank of India just scrapped its earlier ban on banks offering non-deliverable forward (NDF) contracts.
Now, banks can rebook canceled foreign exchange derivative contracts, subject to the applicable limits and have more flexibility trading rupees for both Indian and overseas clients.
This move is meant to steady the trading scene after a period of regulatory uncertainty.
Banks trade NDFs within $100m cap
Earlier, RBI had capped banks' open rupee positions at $100 million to limit risk in the foreign exchange market.
With the rollback, banks can now do more flexible NDF trades within that cap, including with related parties and nonresident clients.
As Anindya Banerjee from Kotak Securities put it, this gives banks some much-needed "breathing space" for real transactions.