The Reserve Bank of India (RBI) has recently raised currency derivative trade limit to how much amount for residents and foreign portfolio investors? [Feb 2018]

$ 150

million

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$ 200

million

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$ 50

million

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$ 100

million

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Solution

The correct option is D $$ 100$ million
The Reserve Bank of India (RBI) has raised exposure limit under Exchange Traded Currency Derivatives (ETCD) trading for residents and foreign portfolio investors (FPIs) to $100 m i l l i o n a c r o s s a l l c u r r e n c y p a i r s i n v o l v i n g t h e I n d i a n r u p e e . T h e R B I s d e c i s i o n t o r a i s e t h e l i m i t w i l l h e l p e n t i t i e s e n g a g e d i n f o r e x t r a n s a c t i o n s t o m a i n t a i n t h e i r c u r r e n c y r i s k s i n a b e t t e r m a n n e r . T h e E T C D i s a f i n a n c i a l i n s t r u m e n t t h a t t r a d e s o n a r e g u l a t e d e x c h a n g e, a n d w h o s e v a l u e i s b a s e d o n t h e v a l u e o f a n o t h e r a s s e t . T h e s e a r e d e r i v a t i v e s t h a t a r e t r a d e d i n a r e g u l a t e d f a s h i o n . T h e s e d e r i v a t i v e s c a n b e u s e d t o h e d g e e x p o s u r e o r s p e c u l a t e o n a w i d e r a n g e o f f i n a n c i a l a s s e t s l i k e c o m m o d i t i e s, e q u i t i e s, c u r r e n c i e s, a n d e v e n i n t e r e s t r a t e s . E a r l i e r, t h e R B I h a d i m p o s e d a l i m i t o f$ 15 million for USD-INR and $5 million for other currency pairs of Indian rupee with Euro, Japanese Yen and British Pound.

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