The Hindu : RBI panel for phased introduction of FC-INR options

Online edition of India's National Newspaper
Thursday, Nov 14, 2002

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RBI panel for phased introduction of FC-INR options

MUMBAI NOV. 13. In a bid to develop the derivatives market in India and making available hedged currency exposures to residents, a Reserve Bank of India-appointed committee has recommended phased introduction of Foreign Currency-Rupee (FC/INR) options.

The committee suggested that options might be introduced as OTC (over the counter) contracts with specifications like strike, notional and maturity tailored to clients needs.

In the initial phase, the technical committee headed by Grace Koshie, chief general manager of the Exchange Department, felt that clients could be allowed to enter into cost reduction strategies involving selling of options, provided that there was no net flow of premium. Inter-market deals in FC-NR option contracts should be allowed to enable authorised dealers (ADs) to initiate positions and managing risks arising out of client and inter-bank transactions within prescribed limits, it said. It said ADs could quote the option premium as absolute amount or as a percentage of notional but the panel does not recommend any particular model or formula for pricing options.

PTI

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