Other major participants in the NDF trade include the state
,, Kotak Mahindra and Standard Chartered, executives said. “Daily average volumes have increased for OTC NDF offshore transactions during the onshore period,” said Bhaskar Panda, executive vice president of HDFC Bank. turn will help attract foreign investors, who still prefer full convertibility of the currency market. IndusInd, Kotak and SBI did not comment.
The differential between onshore and offshore one-month futures trading is now less than one paise, which would have been around four-five paise under normal circumstances. A wider differential encourages speculators to exploit arbitrage opportunities by short selling rupees or dollars, a potential source of increased volatility. The one-month rupee options volatility index is now 4.51% compared to 7.63% almost a year ago, according to data from Financial Benchmarks India (FIBIL). “Axis Bank’s IBU branch has played an important role in NDF markets in GIFT City,” said Lalit Jadhav, CEO of Axis Bank’s IBU branch, GIFT City.
“We have a full-fledged treasury office with robust risk controls and are looking at trading opportunities in this segment that can potentially help reduce volatility and foster price convergence between offshore and on-shore markets. Before local banks were allowed to operate the NDF market in GIFT City, the Reserve Bank of India was unable to control NDF movements on the rupee-dollar. Now the central bank is even ordering private banks as well as traditional public sector lenders to buy or sell units, which is known as NDF market intervention.
“NDF activities would be one of the pillars of our business strategy at GIFT City, which provides an excellent platform to meet global banking needs,” said Anupam Verma, Head of International Banking Unit, IFSC GIFT City, ICICI Bank. The RBI had authorized Indian banks, which are licensed to operate in the GIFT City – Ahmedabad International Financial Services Center, to participate in the NDF market from June 1, 2020. “Liquidity has improved significantly in the market. NDF at GIFT City with major local banks doing transactions, ”said Anindya Banerjee, currency analyst at Kotak Securities.
“We are gradually moving towards full capital account convertibility, which makes our exchange rate readily available. RBI Deputy Governor T Rabi Shankar called on Thursday to prepare for the challenges of full capital account convertibility as foreign investors have full access to India’s debt market through a dedicated channel intended for inclusion of the Global Bond Index.
“A key aspect of currency convertibility is the integration of financial markets,” Shankar said at the fifth annual day of the Foreign Exchange Dealers’ Association of India (FEDAI). “An effort has already started in the interest rate derivatives segment. “NDF-onshore spreads narrowed significantly after allowing Indian banks to enter the NDF space,” he said.