RBI allows NBFCs to trade in currency futures

The Reserve Bank of India (RBI) today allowed non-banking finance companies (NBFCs) to trade in currency futures, giving them the opportunity to hedge their risks against exchange rate volatilities.

However, these entities will trade in these instruments only for hedging their forex exposures, the apex bank said in a notification. "It has been decided that NBFCs may participate in the designated currency futures exchanges recognised by the Sebi as clients, subject to RBI guidelines, only for the purpose of hedging their underlying forex exposures," the central bank said in a circular.

Currency futures refers to a contract to exchange one currency for another at a specified date and price. At present, trading is allowed in the US dollar, the euro, the pound and the yen pairing with the rupee.

The RBI further said NBFCs would have to disclose in the balance-sheets all transactions carried out in this regard.