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Banks get permission to deal in FCS-OIS market

The RBI has decided to allow banks in India to undertake transactions in the offshore Foreign Currency Settled-Overnight Indexed Swap (FCS-OIS) market with non-residents and other market makers.

“This will reduce the segmentation between the onshore and offshore markets, enable more efficient price discovery and further deepen the interest rate derivatives market in India,” said Shaktikanta Das, RBI Governor, during his monetary policy review speech on Thursday.

Banks in India have already been permitted to offer rupee interest rate derivatives such as overnight indexed swaps (OIS) to non-residents.

Limit under VRR increased 

The RBI has proposed to enhance the limit for investments under Voluntary Retention Route (VRR) scheme by Rs 1 lakh crore from Rs 1.5 lakh crore at present to Rs 2.5 lakh crore with effect from April 1, 2022.

The VRR scheme was introduced in March 2019 to facilitate long-term investment by Foreign Portfolio Investors (FPIs) in debt securities issued by the government and the corporates. The response to the scheme has been very encouraging.

This will provide access to additional sources of capital for the domestic debt market including g-secs.

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