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RBI to consider higher overnight forex positions

The Reserve Bank of India said on Friday it would consider requests from authorised foreign exchange dealers such as banks and financial institutions for higher limits on overnight open positions.

In a statement, the bank said the move was aimed at allowing these dealers to provide better customer service as well as to further liberalise foreign exchange transactions.

Banks that wish to increase their limits must get their boards' approval and then approach the central bank, the statement said.

Dealers are usually allowed to maintain open positions that represent a mismatch between foreign currency they have bought and sold, which is also reflected on the balance sheet.

Banks are currently allowed to maintain such positions up to a limit fixed by their managements and approved by the RBI.

Dealers run long or short positions based on their expectations of what flows are likely and how they expect the market to move each day.

The central bank said such positions were necessary for better manoeuverability in foreign exchange operations and facilitating two-way price quotes and finer rates to customers.

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