Rupee NDFs: Standalone dealers get nod to deal in rupee NDFs

Mumbai: Standalone primary dealers (PD) have been authorised by the Reserve Bank to deal in non deliverable rupee derivatives with immediate effect. This comes after the RBI allowed PDs to offer foreign exchange facilities in August 2022. The decision aims to solidify the role of PDs as market makers, provide forex customers with a broader range of options for managing currency risk, and enhance the overall forex market in India.

The Non-Deliverable Forward (NDF) market is an offshore market where forward contracts on currencies are settled without actual delivery of the currency. Unlike standard forward contracts, NDFs are settled in cash, typically in a freely convertible currency like the US dollar.

“PDs have been trying to set up foreign exchange desk for some time now after they were allowed in foreign exchange trading in August 2022, but the trading was slow to pick up. This permission to deal with NDF rupee derivatives will quicken that process now,” said a currency dealer at a public sector bank. PDs generally focus on government bond trading. They are RBI-approved institutions that support borrowing and ensure liquidity and stability in the G-Sec market.

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