All merchant rates are now based on interbank rates. Reserve Bank also fixes its rates of exchange on the basis of prevailing market rates within a margin of 5 per cent on either side of the market rate.
Authorized dealers have recourse to Reserve Bank to sell/buy US dollars to the extent the latter is prepared to transact in the currency at the given point of time. Reserve Bank will not ordinarily buy/sell any other currency from/to authorized dealers. The contract can be entered into on any working day of the dealing room of Reserve Bank. No transaction is entered into on Saturdays. The value date for spot as well as forward delivery should be in conformity with the national and international practice in this regard.
Dealings in International Markets.
The interbank markets in India deal mainly in two currencies, viz., pound sterling, and US dollars. Now-a-days, even EURO is also considered while dealing in the market. .
The exchange control regulations require the authorized dealers to explore the possibility of securing the necessary cover in the interbank market in India before undertaking the operations with overseas banks.
The purchase or sale made by an authorized dealer with overseas banks (including its overseas branches) should be in cover of a genuine transaction with a customer in India or for the purpose of adjustment of its own position in the currency. The transaction should not result in the authorized dealer maintaining at close of business on any day, unreasonably open position in the currency or unreasonably 'mismatched' maturities.
Authorized dealers can buy and sell for spot delivery and permitted currency against rupees or any other permitted currency. They can also buy and sell for forward deliveries any permitted currency against any other permitted currency. Forward purchase or sales of foreign currencies against rupees with overseas banks are prohibited.
Authorized dealers can lend foreign currencies to their overseas branches or correspondents or invest them in treasury bills, call or fixed deposits or in any other manner, without specific approval of Reserve Bank.
