RBI LETS CLEARING CORPORATION TO GUARANTEE FORWARD CURRENCY DEALS

The Reserve Bank of India (RBI) has allowed Clearing Corporation of India (CCIL) to provide guarantee to inter-bank currency forward transactions. The move will help banks use their capital optimally and bring more safety in the currency forward market. At present, currency forwards are
settled on CCIL. The central bank’s approval will enable CCIL to start providing guarantee for currency forward deals between banks within a month. Currently, Banks have to provide capital for exposure to the currency forward market as these deals are not guaranteed on gross basis .This results in banks setting aside additional capital for every buy and sell transaction, adding to their trading cost. After CCIL starts providing guarantee for deals struck on its platform between banks, it
could save a lot for banks, which can utilize capital optimally.