Last updated: Mar 09, 2023, 7:15 PM IST
According to Rao, further dynamics are likely to emerge as the country progresses on the path of internationalization of the rupee.
RBI Deputy Governor M Rajeshwar Rao said that as the economy grows and becomes more developed, the scope of participation in foreign exchange markets would change.
According to Reserve Bank deputy governor M Rajeshwar Rao, India needs to gear up to manage exchange rate volatility as the country progresses on the path of rupee internationalization and freer convertibility of capital accounts.
He also said that internationalization of the rupee has its own benefits as well as challenges and risks that the country and the Reserve Bank of India (RBI) will face.
Rao delivered the keynote address at the 17th FEDAI conference in Cairo on Sunday, saying that as the economy grows and becomes more developed, the scope of participation in foreign exchange markets would change.
“With the increasing integration of the economy with the rest of the world, more and more entities will be exposed, directly or indirectly, to currency risk. There will likely be requirements to allow economic risk hedging,” he said.
An entirely new market has opened up with a new set of market participants, with banks in India allowed to participate in the offshore rupee derivatives non-deliverable market in an effort to integrate markets. This is part of the overall effort to make the rupee more convertible, he said.
Also Read: How To Open An RBI Retail Direct Account To Invest In G-Sec Market
According to him, further dynamics are likely to emerge as the country progresses on the path of internationalization of the rupee.
“It is now widely accepted that internationalization and a freer capital account have its own benefits, but not without risks and that freer flows of capital come with their own challenges, the most important of which is that of volatility and we need to make that happen,” he noted.
He noted that in a constantly evolving world where change is the only constant, the Indian currency market’s journey over the past few decades has been one of continuous development and innovation.
RBI remains committed to continuously moving forward at a steady pace in line with the changing macro-financial environment – globally and domestically, he said.
He said greater challenges will arise as markets become more developed and interconnected, and as product ranges expand.
Read all the latest business news here
(This story has not been edited by News18 staff and was published from a syndicated news agency feed)
