BOMBAY: The Reserve Bank of India (RBI) suspended all forward sales of us dollars to authorized dealers and stopped spot sales in cover of their forward transactions pending a review of arrangements for forward cover in the wake of the improved foreign exchange reserves position.
Announcing this here the RBI said the foreign exchange reserves had improved substantially and it was now in a position to meet the demand for foreign exchange for all genuine requirements.
In this context the RBI also referred to substantial speculative tendencies in the forward market.
The RBI reiterated that al requirements of foreign exchange for genuine transactions would continue to be met on a spot basis as the country had foreign currency assets to meet nearly two and half months requirements of imports
The RBI had introduced the scheme of forward sale of US dollars to authorize dealers in May 1991 in view of the low level of foreign exchanger serves then and to avoid pressure on the band to cover for forward transactions obtained by authorized dealers on a spot basis from the Reserve Bank.
Article extracted from this publication >> March 6, 1992
