RBI and Sebi step in to arrest rupee’s decline

RBI and Sebi step in to arrest rupee’s declineThe drastic decline in the value of the Indian rupee over the past few days forced the Reserve Bank of India (RBI) and the Securities & Exchange Board of India (Sebi) step in to help the local currency regain some of the lost strength.

At one point on Monday, the rupee slipped to its record low of 61.21 against the US dollar.

The RBI intervened and barred authorized dealer banks from conducting any proprietary trading in both currency futures and options markets. It ruled that authorized dealers category-I banks could conduct transaction only on behalf of their clients.

Capital market regulator Sebi played its part by curtailing open position limits of clients as well as of non-bank trading members. The regulator also said that the step was taken in consultation with the central bank.

Sebi said in a statement, "In consultation with the RBI . it has been decided to curtail position limits and increase margin requirements for currency derivatives."

Starting Thursday, the gross open position of a client across all contracts should not go beyond 6 per cent of the entire open interest or 10 million dollars, whichever is lower.

Oil marketing companies, the biggest purchaser of US dollars, have reportedly been asked to meet their requirements for the US currency from a single bank rather than inviting bids from several banks.