FOREX & FEMA NEWSLETTER

Transcription

1 October 2017

2 FOREX & FEMA NEWSLETTER The daily average monthly turnover in India s foreign exchange market including merchant and interbank transactions in the category of purchases has increased to USD 2,672 million in September 2017 from USD 2,048 million in August In the category of sales, the average daily turnover has also increased to USD 2,738 million in September 2017 from USD 2,098 million in August 2017 In the month of October 2017, the average exchange rate of rupee against USD stands at The average exchange rate of rupee against Japanese yen stands at The exchange rate of rupee against Euro has remained at an average of 76.4 in the month of October While, the average exchange rate of rupee against pound sterling is at 85.9 during October India s foreign exchange reserves stands at about USD 400 billion as on October 20,2017 of which Foreign Currency Assets consists of USD 375 billion, Gold reserves at USD 21.2 billion, SDRs at USD 1.5 billion and reserve position in the IMF at USD 2.3 billion At regulatory front, RBI releases Discussion Paper on foreign exchange trading platform for retail participants. The discussion paper proposes a scheme to encourage transparent and fair pricing in the retail forex market by developing a foreign exchange platform for retail participants along the lines of the FX-Clear platform of Clearing Corporation of India Limited (CCIL). Further, in regards to the directions related to risk management and inter-bank dealings Facilities for hedging trade exposures invoiced in Indian Rupees, para 6 under Section II (Facilities for Persons Residents outside India) of the aforementioned master direction, non-residents are permitted to hedge the currency risk arising out of INR invoiced exports from and imports to India with AD Category I banks in India. On a review of this facility, it has been decided by RBI to permit the central treasury (of the group and being a group entity) of such non-residents to undertake hedges for and behalf of such nonresidents with AD Category I banks in India as per the existing Model I and Model II. On the basis of an assessment of the current and evolving macroeconomic situation at the meeting today, the Monetary Policy Committee (MPC) of RBI kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0% in its Fourth Bi-monthly Monetary Policy Statement, Consequently, the reverse repo rate under the LAF remains at 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate stands at 6.25%. At market front, BSE Sensex closed at 33, as on 31st October 2017 as against 31, as on 29th September 2017 registering a growth of 6.2% over previous month. During October 2017, Sensex recorded an intraday high of 32, and an intraday low of 31, While, Nifty closed at as on 31st October 2017 as against as on 29th September 2017 registering a growth of about 5.6% over previous month. During October 2017, Nifty recorded an intraday high of and an intraday low of On the other hand, the price of crude oil has increased to USD 54.5 per barrel in September 2017 as compared to USD 50.6 per barrel in August

3 India s foreign exchange market turnover (daily average) FOREX & FEMA NEWSLETTER The daily average monthly turnover in India s foreign exchange market including merchant and interbank transactions in the category of purchases has increased to USD 2,672 million in September 2017 from USD 2,048 million in August In the category of sales, the average daily turnover has also increased to USD 2,738 million in September 2017 from USD 2,098 million in August 2017 Daily average monthly turnover in India s foreign exchange market (USD million) Source: PHD Research Bureau compiled from RBI Overview of Indian rupee In the month of October 2017, the average exchange rate of rupee against USD stands at The average exchange rate of rupee against Japanese yen stands at The exchange rate of rupee against Euro has remained at an average of 76.4 in the month of October While, the average exchange rate of rupee against pound sterling is at 85.9 during October Trend of rupee against various currencies (October 2017) Indian rupee overview Average Exchange rate of rupee against USD stands at 65.0 in October 2017, against pound sterling at 85.9, against Euro at 76.4 and against Japanese Yen at Source: PHD Research Bureau compiled from RBI 3

4 I Open House Discussion on Impact of recent economic and regulatory developments on Indian forex market Tuesday, 31st October 2017, PHD House, New Delhi PHD Chamber of Commerce and Industry organized an Open House Discussion on Impact of recent economic and regulatory developments on Indian forex market on 31st October 2017 at PHD House, New Delhi. The eminent speakers of the Open House Discussion were Shri R. S. Ratho, Chief General Manager, Financial Markets Operation Department, Reserve Bank of India, Mumbai and Shri Vikas Jaiswal, Assistant General Manager, Foreign Exchange Department, Reserve Bank of India, New Delhi. Other dignitaries on the dais were Shri Anil Khaitan, President, PHD Chamber, Shri D K Aggarwal, Vice President, PHD Chamber, Shri Shyam Poddar, Managing Committee Member, PHD Chamber and Dr. S P Sharma, Chief Economist, PHD Chamber were also the part of discussions. Glimpse of the Open House Discussion on Impact of recent economic and regulatory developments on Indian forex market Photo caption from left to right: Shri Anil Khaitan, President, PHD Chamber, Dr. S P Sharma, Chief Economist, PHD Chamber, Shri D K Aggarwal, Vice President, PHD Chamber, Shri R. S. Ratho, Chief General Manager, Financial Markets Operation Department, Reserve Bank of India, Mumbai, Shri Vikas Jaiswal, Assistant General Manager, Foreign Exchange Department, Reserve Bank of India, New Delhi and Shri Shyam Poddar, Managing Committee Member, PHD Chamber 4

5 While presenting the welcome remarks in the Open House, Shri Anil Khaitan, President, PHD Chamber stated that that regulation of forex market is necessary in the interest of the people who are in forex market and running their businesses with foreign exchange. Further, he suggested that corporates must cover themselves and should not expose their companies to huge financial risks because of forex fluctuations. He added FOREX that & exchange FEMA NEWSLETTER rates are determined mainly because of couple of economic features such as inflation rates, interest rate differentials between two countries and supply and demand especially in India. He also appreciated RBI for having tight controls on all the derivatives which are there in foreign exchange and these derivatives are a very safe method of basically hedging the foreign exchange risk, going forward. Shri R. S. Ratho, Chief General Manager, Financial Markets Operation Department, Reserve Bank of India, Mumbai sensitised the members and participants about the newly introduced Global Foreign Exchange Code of Conduct. The benefits of the Global Foreign Exchange Code were apprised to the participants for the effective functioning of the foreign exchange market to promote trade and investments globally. He stated that there is no one to one correlation in the real world and one factor does not influence the overall functioning of the forex market. He highlighted that RBI is reaching to the corporate sector to spread awareness on the recently introduced Global Foreign Exchange Code. He stated that corporate community has the significant exposure to the forex markets especially on the buy side. Unless the corporate sector is sensitised and made aware about the benefits of Global Foreign Exchange Code, attempt of reforming forex market remains incomplete. Shri Ratho stated that Global Foreign Exchange Code organized around six core principles i.e. Ethics, Governance, Execution, information sharing, risk management and compliance and confirmation and settlement. Shri Vikas Jaiswal, Assistant General Manager, Foreign Exchange Department, Reserve Bank of India, New Delhi in his remarks highlighted the recent regulatory developments in the forex market. He gave a brief overview on the current account transactions i.e trade and remittances and capital account transactions. He added that India became fully convertible in 1994, still regulating some aspects of current account transactions because of reasons such as though, remittances are fully permitted for trade transactions, miscellaneous purposes, travel purposes, etc. He highlighted about the proactive policies made by them in line with evolving economic environment conditions prevailing in the country. He also added that the approach is always calibrated towards fuller capital account transactions. Further, he stated that rationalization is a continuous process and it has to be tandem with the current environment, therefore, several endeavors have been taken from time to time at regulatory front for the facilitation of the stakeholders involved in the forex market. Shri Shyam Poddar, Managing Committee Member, PHD Chamber in his theme presentation stated that forex market has seen sea side change from the regulatory, restricted to open and then semi regulatory. He added that we have got the best regulatory semi-controlled forex market operations in India. He stated that there are four type of corporates. One is a conservative corporate; when exposure arises they hedge themselves blindly and don t bother about the opportunity gain and loss. Second is moderate one, those who calculate risk with the available products in market, covering their risk and also have the chance of opportunity gain. Third are aggressive ones who do whatever they want to do as per their risk appetite. He also talked about volatility in the currency market. He added that there s a myth that prevails that if rupee depreciates then exports go up and if rupee appreciates then exports go down. He stated that this is absolutely incorrect. He added that when in 2016 rupee depreciated by 23% and exports declined by 17%. Under these circumstances, basic strategy could be define your cost of exposure instead of going for market perception and must protect your cost of exposure. Shri D K Aggarwal, Vice President, PHD Chamber proposed concluding remarks and vote of thanks. He appreciated the eminent speakers from RBI in addressing the queries of the participants. Shri Aggarwal also opined that simplification of procedures and efforts in simplifying rules and regulations by RBI is commendable. He stated that reforms in the foreign exchange market is a dynamic process and needs to be harmonised with the evolving macroeconomic environment. He also opined that in exchange traded platforms there are options only on rupee dollar contract, hence he suggested that options on other contracts like Euro Dollar, GBP Rupee, Euro-Rupee and Yen- Rupee. He also added that there is a need to enhance the trading timings in the exchange traded platforms to facilitate exporters and importers for meeting their demand to hedge. Dr. S P Sharma, Chief Economist, PHD Chamber moderated the Open House Discussion. He stated that India s growth rate remains promising. India s GDP growth stood at 7.1% in and expected to grow at 6.7% in the current year as projected by IMF and RBI. India is improving in the global competitiveness year after year. He also stated that there are lots of developments in foreign exchange market for the simplification of operating procedures and ease of hedging the risk. Going ahead, more focus should be laid on minimizing the volatility vis-à-vis global economic developments. Further,he appreciated RBI, as rupee was depreciating like anything with lot of volatility in 2013 but today rupee is significantly stable. 5

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8 Monthly trend of rupee exchange rate (high and low) against currencies In the month of October 2017, the exchange rate of rupee against USD recorded highest at 65.5, while it registered lowest at The exchange rate of rupee against pound registered highest at and lowest at In case of Euro currency, exchange rate of rupee recorded highest at and lowest at The exchange rate of rupee against Japanese yen recorded highest at 58.8 and lowest at 57. Indian rupee overview (October 2017) INR against Open High Low Close foreign currency USD Pound Sterling Euro Japanese Yen Source: PHD Research Bureau compiled from RBI Exchange rate of rupee against USD stood highest at and lowest at in October Foreign exchange reserves India s foreign exchange reserves stands at about USD 400 billion as on October 20,2017 of which Foreign Currency Assets consists of USD 375 billion, Gold reserves at USD 21.2 billion, SDRs at USD 1.5 billion and reserve position in the IMF at USD 2.3 billion Foreign exchange reserves as on October 20, 2017 (USD Billion) India s foreign exchange reserves are at about USD 400 billion as on October 20, 2017 Source: PHD Research Bureau compiled from RBI 8

9 Trend of USD against Japanese Yen, British Pound and Euro in October2017 Trend of USD against Japanese Yen (October 2017) Oct-17 2-Oct-17 3-Oct-17 4-Oct-17 5-Oct-17 6-Oct-17 7-Oct-17 8-Oct-17 9-Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct-17 Source: PHD Research Bureau compiled from x-rates. Trend of USD against British Pound (October 2017) Oct-17 2-Oct-17 3-Oct-17 4-Oct-17 5-Oct-17 6-Oct-17 7-Oct-17 8-Oct-17 9-Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct-17 Source: PHD Research Bureau compiled from x-rates. Trend of USD against Euro (October 2017) Oct-17 2-Oct-17 3-Oct-17 4-Oct-17 5-Oct-17 6-Oct-17 7-Oct-17 8-Oct-17 9-Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct Oct-17 Source: PHD Research Bureau compiled from x-rates. 9

10 Recent regulatory developments RBI releases Discussion Paper on foreign exchange trading platform for retail participants The Reserve Bank of India releases a Discussion Paper on Foreign exchange trading platform for retail participants. The discussion paper proposes a scheme to encourage transparent and fair pricing in the retail forex market by developing a foreign exchange platform for retail participants along the lines of the FX-Clear platform of Clearing Corporation of India Limited (CCIL). The foreign exchange market in India may be broadly divided into the interbank segment and the retail segment. The participants in the interbank segment are banks holding Authorised Dealer (AD) licenses under the Foreign Exchange Management Act (FEMA), Transaction in this segment are conducted through trading platforms like FXT-D2 (Thomson Reuters), FX-Clear (Clearing Corporation of India Limited (CCIL)) etc. before being settled by CCIL (for Cash, Tom, Spot and Forward USD-INR transactions) through a process of multilateral netting. Retail Customers with a need to buy/sell foreign exchange, currently do so over the phone with an AD Bank. While proprietary electronic dealing platforms of individual banks and Multi-Bank Portals (MBPs) are also available, access to them is restricted to retail customers with a minimum order size. In one-to-one negotiated dealing over the phone, customers with large order size command more negotiating power compared to the ones having smaller forex requirement. Banks also follow the practice of fixing card rates for the various forex pairs at the beginning of the day at which purchases and sales from/to retail customers would be made regardless of the intraday movement of the currency. Issues to be addressed: The issue of transparent and fair pricing in the retail forex market has been coming up in various fora and public interactions for some time. The Reserve Bank of India (RBI) has also been receiving applications under RTI and queries/complaints regarding the guidelines of Reserve Bank on the spread that can be charged over the interbank forex rate by the AD banks and adherence of banks to the same. This issue has also attracted attention of regulators worldwide, culminating in publication of the FX Global Code (FXGC) developed by a partnership between central banks (which included the Reserve Bank of India) and Market Participants from 16 jurisdictions around the globe. Principle 14 of the said code requires that the Mark Up (the spread or charge that may be included in the final price of a transaction) applied to Client transactions by Market Participants acting as Principal should be fair and reasonable. Current guidelines on charges for forex transactions: Presently, AD banks are free to determine their own charges on various types of forex transactions, subject to RBI s guidelines that Banks should ensure that the charges are reasonable and are not out of line with the average cost of providing these services. Banks are also required to ensure that customers with a low volume of activity are not penalised. Possible means for addressing the issue While considering possible solutions for the above issue the following 2 options were considered: a) Mandating a cap on spreads charged over the inter-bank rates by banks to their retail customers. b) Facilitate price determination of retail customer transactions in the market by providing them direct access to the foreign exchange market. 10

11 Implementing the selected solution: Clearing Corporation of India Limited (CCIL) operates an interbank USD/INR spot trading platform named FX-CLEAR. They would develop an electronic spot trading platform for retail customers modelled on their existing interbank spot trading platform. Based on experience gathered, vendors of other FX platforms may be allowed to offer similar retail platforms in the future. The key features of the proposed platform are as: i. The existing FX-CLEAR platform shall be extended to the retail customers of the FX-CLEAR member banks through an internet based application. The retail market will be separate from the interbank market. AD Cat-I banks may access both interbank and retail market while the retail customers would be allowed to access only the retail market for dealing. ii. The retail market will have the same market hours as the interbank market (09:00 to 17:00 hrs.) iii. The customer can access the retail market platform through an AD Cat-I bank. iv. The AD Cat-I bank shall set the limits upto which orders may be placed on the retail forex platform by its customers. Customer can directly execute the trade up to the limit by placing bid/offer quotes. Trades will be executed by anonymous order matching on price-time priority. v. Minimum order size would be USD 1000 and thereafter in multiples of USD 500. vi. The maximum order size shall be USD 500,000. The features may undergo change depending upon feedback received on this discussion paper. RBI issues directions related to risk management and inter-bank dealings Facilities for hedging trade exposures invoiced in Indian Rupees Attention of Authorized Dealers Category I (AD Category I) banks has been invited to the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 dated May 3, 2000 (Notification No. FEMA. 25/RB-2000 dated May 3, 2000) and Master Directions on Risk Management and Inter-Bank Dealings dated July 5, 2016 as amended from time to time. In terms of para 6 under Section II (Facilities for Persons Residents outside India) of the aforementioned master direction, non-residents are permitted to hedge the currency risk arising out of INR invoiced exports from and imports to India with AD Category I banks in India. On a review of this facility, it has been decided to permit the central treasury (of the group and being a group entity) of such non-residents to undertake hedges for and behalf of such non-residents with AD Category I banks in India as per the existing Model I and Model II. Facilities for Hedging Trade Exposures, invoiced in Indian Rupees in India Purpose: To hedge the currency risk arising out of genuine trade transactions involving exports from and imports to India, invoiced in Indian Rupees, with AD Category I banks in India. Products: Forward foreign exchange contracts with rupee as one of the currencies, foreign currency- INR options. Operational Guidelines, Terms and Conditions: The AD Category I banks can opt for either Model I or Model II as given below: 11

12 12 FOREX & FEMA NEWSLETTER Model I : Non-resident exporter / importer or its central treasury (of the group and being a group entity) dealing through their overseas bank (including overseas branches of AD banks in India) i. Non-resident exporter / importer, or its central treasury approaches his banker overseas with appropriate documents with a request for hedging their Rupee exposure arising out of a confirmed import or export order invoiced in Rupees. ii. The overseas bank in turn approaches its correspondent in India (i.e. the AD bank in India) for a price to hedge the exposure of its customer along with documentation furnished by the customer that will enable the AD bank in India to satisfy itself that there is an underlying trade transaction (scanned copies would be acceptable). The following undertakings also need to be taken from the customer: That the same underlying exposure has not been hedged with any other AD Category I bank/s in India If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately In case of a central treasury, an authorization from the entity having INR exposure to hedge on its behalf iii. A certification on the end client KYC may also be taken as a one-time document from the overseas bank by the AD bank in India. iv. The AD bank in India based on documents received from the overseas correspondent should satisfy itself about the existence of the underlying trade transaction and offer a forward price (no two-way quotes should be given) to the overseas bank who, in turn, will offer the same to its customer. The AD bank, therefore, will not be dealing directly with the overseas importer / exporter. v. The amount and tenor of the hedge should not exceed that of the underlying transaction and should be in consonance with the extant regulations regarding tenor of payment / realization of the proceeds. vi. On due date, settlement is to be done through the correspondent bank s Vostro or the AD bank s Nostro accounts. vii. The contracts, once cancelled, cannot be rebooked. viii. The contracts may, however, be rolled over on or before maturity subject to maturity of the underlying exposure. ix. On cancellation of the contracts, gains may be passed on to the customer subject to the customer providing a declaration that he is not going to rebook the contract or that the contract has been cancelled on account of cancellation of the underlying exposure. x. In case the underlying trade transaction is extended, rollover can be permitted once based on the extension of the underlying trade transaction for which suitable documentation is to be provided by the overseas bank and the same procedure followed as in case of the original contract. Model II : Non-resident exporter / importer or its central treasury (of the group and being a group entity) dealing directly with the AD bank in India. i. The overseas exporter / importer or its central treasury approaches the AD bank in India with a request for forward cover in respect of underlying transaction for which he furnishes appropriate documentation (scanned copies would be acceptable), on a pre-deal basis to enable the AD bank in India to satisfy itself that there is an underlying trade transaction, and details of his overseas banker, address etc. The following undertakings also need to be taken from the customer That the same underlying exposure has not been hedged with any other AD Category I bank/s in India.

13 If the underlying exposure is cancelled, the customer will cancel the hedge contract immediately. In case of a central treasury, an authorization from the entity having INR exposure to hedge on its behalf ii. The AD bank may obtain certification of KYC/AML in the format in Annex XVIII. The format can be obtained through the overseas correspondent / bank through SWIFT authenticated message. In case the AD bank has a presence outside India, the AD may take care of the KYC/AML through its bank s offshore branch. iii. AD banks should evolve appropriate arrangements to mitigate credit risk. Credit limits can be granted based on the credit analysis done by self / the overseas branch. iv. The amount and tenor of the hedge should not exceed that of the underlying transaction and should be in consonance with the extant regulations regarding tenor of payment / realization of the proceeds. v. On due date, settlement is to be done through the correspondent bank s Vostro or the AD bank s Nostro accounts. AD banks in India may release funds to the beneficiaries only after sighting funds in Nostro / Vostro accounts. vi. The contracts, once cancelled, cannot be rebooked. vii. The contracts may, however, be rolled over on or before maturity subject to maturity of the underlying exposure. viii. On cancellation of the contracts, gains may be passed on to the customer subject to the customer providing a declaration that he is not going to rebook the contract or that the contract has been cancelled on account of cancellation of the underlying exposure. ix. In case the underlying trade transaction is extended, rollover can be permitted once based on the extension of the underlying trade transaction for which suitable documentation is to be provided by the overseas bank and the same procedure followed as in case of the original contract. x. AD banks shall report hedge contracts booked under this facility to CCIL s trade repository with a special identification tag. Master Direction on Levy of Penal Interest for Delayed Reporting/Wrong Reporting/Non-Reporting of Currency Chest Transactions and Inclusion of Ineligible Amounts in Currency Chest Balances In terms of the Preamble, under Section 45 of the RBI Act, 1934 and 35 A of the Banking Regulation Act, 1949, the Bank issues guidelines / instructions for realising the objectives of our Clean Note Policy. With a view to sustain these efforts and ensure discipline among the banks on timely and accurate reporting of currency chest transactions, RBI have issued instructions on the subject. Reporting of Currency Chest Transactions The minimum amount of deposit into/withdrawal from currency chest will be INR 1,00,000/- and thereafter, in multiples of INR 50,000/-. Time limit for Reporting--The currency chests should invariably report all transactions through ICCOMS on the same day by 9 PM by uploading data through the Secured Website (SWS) to their respective link offices. Link offices should invariably report the consolidated position to the Issue Offices latest by 11 PM on the same day. The Sub-Treasury Offices (STOs) should report all transactions directly to the Issue Office of the Reserve Bank by 11 PM on the same day. Relaxation in respect of strike period in banks-relaxation in the reporting period on account of general/specific strike situation will be considered on case-to-case basis. Levy of penal interest for delays : In the event of delay in reporting currency chest transactions, penal interest at the rate indicated in paragraph 3 of this circular will be levied on the amount due from the chest 13

14 holding bank for the period of delay. Penal interest will be calculated on T+0 basis i.e. penal interest will be levied in respect of transactions not reported by Link Office to the Issue Office by 11 PM on the same business day. However, Reserve Bank may at its discretion grant appropriate grace period in the matter of levy of penal interest. Penal interest will also be charged for delay in submission of chest slips in the case of single chest / STOs directly linked to Issue Department of the circle. Master Direction on Issuance and Operation of Prepaid Payment Instruments 1. In exercise of the powers conferred under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), the Reserve Bank of India (RBI) being satisfied that it is necessary and expedient in the public interest to do so, hereby, issues these Directions. 1.2 Short title and commencement a. These Directions shall be called the Reserve Bank of India (Issuance and Operation of Prepaid Payment Instruments) Directions, 2017 (Master Direction). b. These Directions shall come into effect from October 11, c. Existing authorised Prepaid Payment Instrument (PPI) issuers shall ensure compliance with the revised requirements on or before December 31, 2017, except where timelines have been specified in this Direction. 1.3 Applicability: The provisions of the Master Direction shall apply to all PPI Issuers, System Providers and System Participants. 1.4 Purpose a. To provide a framework for authorisation, regulation and supervision of entities operating payment systems for issuance of PPIs in the country; b. To foster competition and encourage innovation in this segment in a prudent manner while taking into account safety and security of transactions as well as systems along with customer protection and convenience. c. To provide for harmonisation and interoperability of PPIs 1.5 For the purpose of these Directions, the term entities refers to banks and non-bank entities who have approval / authorisation from the RBI to issue PPIs as well as those who are proposing to issue PPIs. 1.6 Banks and non-bank entities have been issuing PPIs in the country after obtaining necessary approval / authorisation from RBI under the Payment and Settlement Systems Act, 2007 (PSS Act). These entities have been operating within the framework of the initial guidelines on Issuance and Operation of PPIs issued in April 2009 and the subsequent Master Circulars issued on the subject, as amended from time to time. Taking into account the developments in the field and the progress made by PPI issuers, all existing guidelines issued on the subject till date have been reviewed and are contained in the Master Direction. 1.7 The Master Direction lays down the eligibility criteria and the conditions of operation for payment system operators involved in the issuance of semi-closed and open system PPIs in the country. All entities approved / authorised to operate payment systems involving the issuance of PPIs shall comply with these Directions. 1.8 No entity can set up and operate payment systems for issuance of PPIs without prior approval / authorisation of RBI. 14

15 Macro-economic indicators August 2017 IIP grows at 4.3% Growth in industry output, as measured in terms of IIP, for the month of August 2017 stands at 4.3% as compared to 0.9% in July The growth in the three sectors mining, manufacturing and electricity in August 2017 stands at 9.4%, 3.1% and 8.3% respectively over August The cumulative growth in these three sectors during April-August over the corresponding period of has been 3.3%, 1.6% and 6.2% respectively. Primary goods growth stands at 7.1%, capital goods growth stands at 5.4%, intermediate goods growth stands at -0.2%, infrastructure/ construction goods growth stands at 2.5%, consumer durables growth stands at 1.6% and consumer non-durables growth stands at 6.9% during August 2017 as compared to the previous year. September 2017 CPI inflation stands at 3.28% The all India general CPI inflation (Combined) for September 2017 stands at 3.28% as compared to 3.28% in August The inflation rates for rural and urban areas for September 2017 are 3.15% and 3.44% respectively, as compared to 3.22% and 3.35% respectively, for August Rate of inflation during September 2017 for sugar and confectionery stands at 6.77%, pan and tobacco at 6.95%, cereals and products at 3.70%, milk and products at 3.87%, egg at (-)0.15%, spices at (- )2.31%, pulses and products at (-)22.51% etc. September 2017 WPI inflation stands at 2.6% Driven by decline in the prices of food articles, cereals, vegetables, fruits and petrol, WPI inflation stands at 2.60% in September 2017 as compared 3.24% in August The index for this major group declined by 3 percent to (provisional) from (provisional) for the previous month. The WPI inflation stands at 2.60% in September 2017 as compared to 3.24% in August 2017, 1.88% in July 2017, 0.9% in June 2017, 2.26% in May 2017 and 3.85% in April The decline in WPI inflation in the month of September 2017 is attributed to fall in the prices of food articles (2.04%), cereals(-0.07%), vegetables (15.48%), fruits (2.93%) and petrol(15.79%). ECBs stand at USD 3.3 billion during September 2017 Indian firms have raised about USD 3.3 billion through external commercial borrowings (ECBs) by automatic and approval route in September 2017 as against USD 1.6 billion in August The borrowings stood at USD 1.6 billion in September Merchandize exports and imports grew by 25.7% and 18.1% during September 2017, respectively India s merchandize exports have continued with commendable growth rate by registering a tremendous growth figure of 25.67% in September 2017 to value at USD billion compared to USD billion during September On the other hand, India s merchandize imports also witnessed expansion, growing by 18.09% to value at USD billion in September 2017 compared to USD billion during same period previous year. 15

16 India s trade statistics at a glance Merchandise Apr-17 May-17 June-17 July-17 Aug-17 Sep-17 Exports (USD billion) Growth (%) Imports (USD billion) Growth (%) Trade Balance (USD billion) Source: PHD Research Bureau, compiled from Ministry of Commerce and Industry, Govt of India Gross Bank Credit grows at 4.2% in September 2017 Gross bank credit grows at 4.2% in September 2017 as compared to 5% in August The gross bank credit growth stands at 11.5% during September On a year-on-year (y-o-y) basis, nonfood bank credit increased by 6.1% in September 2017 as compared to 5.5% in August Credit to agriculture and allied activities increased by 5.8% in September 2017 as against 6.5% in August RBI maintains status quo in Fourth Bi-monthly Monetary Policy Statement, On the basis of an assessment of the current and evolving macroeconomic situation at the meeting today, the Monetary Policy Committee (MPC) of RBI has decided to kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.0%. Consequently, the reverse repo rate under the LAF remains at 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate stands at 6.25%. The decision of the MPC was consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2 per cent, while supporting growth. Trends in the secondary market BSE Sensex closed at 33, as on 31st October 2017 as against 31, as on 29th September 2017 registering a growth of 6.2% over previous month. During October 2017, Sensex recorded an intraday high of 32, and an intraday low of 31, Movement of BSE Sensex since April 2016 Month Open High Low Close % change on closing values over previous month Apr-16 25, , , , May-16 25, , , , Jun-16 26, , , , July-16 27, , , , Aug-16 28, , , , Sep-16 28, , , , Oct-16 27, , , , Nov-16 27, , , , Dec-16 26, , , , Jan-17 26, , , , Feb-17 27, , , , Mar-17 28, , , , Apr-17 29, , , ,

17 May-17 30, , , , June-17 31, , , , July-17 31, , , , Aug-17 32, , , , Sep-17 31, , , , Oct-17 31, , , , Source: PHD Research Bureau compiled from BSE Sensex While, Nifty closed at as on 31st October 2017 as against as on 29th September 2017 registering a growth of about 5.6% over previous month. During October 2017, Nifty recorded an intraday high of and an intraday low of Movement of NIFTY since April 2016 Month Open High Low Close % change on closing values over previous month Apr May Jun July Aug Sep (-) 1.9 Oct Nov Dec Jan Feb Mar Apr May June July Aug (-) 1.57 Sep (-) 1.3 Oct Source: PHD Research Bureau compiled from NSE. The price of crude oil has increased to USD 54.5 per barrel in September 2017 as compared to USD 50.6 per barrel in August Trend of price of crude oil (USD/bbl) Source: PHD Research Bureau compiled from Ministry of Petroleum & Natural Gas, Government of India 17

18 India s key statistics so far... S. NO. Indicators October-17 1 Daily average monthly turnover in foreign exchange market Purchase (USD billion) Sep Sales (USD billion) Sep Exchange rate of rupee against USD (monthly average)* Exchange rate of rupee against Pound Sterling (monthly average) * Exchange rate of rupee against Euro (monthly average) * Exchange rate of rupee against Japanese Yen (monthly average) * Foreign exchange reserves (USD billion)^ IIP (growth in %)-August CPI inflation (%)** WPI inflation (%)** FDI equity inflow (USD billion)*** FDI equity inflow (% growth)*** External Debt (USD billion)@ ECBs (USD billion)** Current account deficit as a % of GDP Q1 FY India s exports (USD billion) ** Growth of exports (%) ** India s imports (USD billion)** Growth of imports (%) ** Trade balance (USD billion)** (-) BSE Sensex $ 31, Nifty $ Repo rate ^^ 6.00% 23 Reverse repo rate^^ 5.75% 24 Cash reserve ratio^^ 4% 25 Statutory liquidity ratio^^ 19.5% Source: PHD Research Bureau compiled from various sources. *Data for the month of Oct ^ Foreign exchange reserves as on October 20,2017 **Data for month of Sep 2017, *** Data for April-June for the end March 2017, $Data for BSE SENSEX and CNX NIFTY are closing figures of the month of October ^^Key policy rates such as repo, CRR, reverse repo and SLR pertains to as on 4th October

19 Dr. S P Sharma Chief Economist Project Team Ms. Surbhi Sharma Sr. Research Officer Ms. Neha Gupta Research Associate Disclaimer FOREX and FEMA Newsletter is prepared by PHD Chamber of Commerce and Industry to provide a broad view of developments related to forex affairs of the Indian economy. This newsletter may not be reproduced, wholly or partly in any material form, or modified, without prior approval from the Chamber. It may be noted that this newsletter is for information purposes only. Though due care has been taken to ensure accuracy of information to the best of the PHD Chamber s knowledge and belief, it is strongly recommended that readers should seek specific professional advice before taking any decisions. Please note that the PHD Chamber of Commerce and Industry does not take any responsibility for outcome of decisions taken as a result of relying on the content of this newsletter. PHD Chamber of Commerce and Industry shall in no way, be liable for any direct or indirect damages that may arise due to any act or omission on the part of the Reader or User due to any reliance placed or guidance taken from any portion of this newsletter. Copyright 2017 PHD Chamber of Commerce and Industry ALL RIGHTS RESERVED. No part of this publication including the cover, shall be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of, and acknowledgement of the publisher (PHD Chamber of Commerce and Industry). 19

20 20 FOREX & FEMA NEWSLETTER

21 PHD Research Bureau FOREX & FEMA NEWSLETTER PHD Research Bureau; the research arm of the PHD Chamber of Commerce and Industry was constituted in 2010 with the objective to review the economic situation and policy developments at sub-national, national and international levels and comment on them in order to update the members from time to time, to present suitable memoranda to the government as and when required, to prepare State Profiles and to conduct thematic research studies on various socioeconomic and business developments. The Research Bureau has been instrumental in forecasting various lead economic indicators national and sub-national. Many of its research reports have been widely covered by media and leading business newspapers. Research Activities Research Studies Comments on Economic Newsletters Developments Macro Economy Economic Affairs Newsletter (EAC) Consultancy Trade & Investment Facilitation Services (TIFS) State Profiles States Development Impact Assessments Global Economic Monitor (GEM) Infrastructure Trade & Investment Facilitation services (TIFS) Newsletter Business Research and Consultancy Thematic Research Reports Foreign exchange market State Development Monitor (SDM) Releases on Economic Developments Global Economy & International Trade FOREX & FEMA Newsletter 21

22 Studies Undertaken by PHD Research Bureau Thematic research reports 1. Comparative study on power situation in Northern and Central states of India (September2011) 2. Economic Analysis of State (October 2011) 3. Growth Prospects of the Indian Economy, Vision 2021 (December 2011) 4. Budget : Move Towards Consolidation (March 2012) 5. Emerging Trends in Exchange Rate Volatility (Apr 2012) 6. The Indian Direct Selling Industry Annual Survey (May 2012) 7. Global Economic Challenges: Implications for India (May 2012) 8. India Agronomics: An Agriculture Economy Update (August 2012) 9. Reforms to Push Growth on High Road (September 2012) 10. The Indian Direct Selling Industry Annual Survey : Beating Slowdown (March 2013) 11. Budget : Moving on reforms (March 2013) 12. India- Africa Promise Diverse Opportunities (November 2013) 13. India- Africa Promise Diverse Opportunities: Suggestions Report (November 2013) 14. Annual survey of Indian Direct Selling Industry (December 2013) 15. Imperatives for Double Digit Growth (December 2013) 16. Women Safety in Delhi: Issues and Challenges to Employment (March 2014) 17. Emerging Contours in the MSME sector of Uttarakhand (April 2014) 18. Roadmap for New Government (May 2014) 19. Youth Economics (May 2014) 20. Economy on the Eve of Union Budget (July 2014) 21. Budget : Promise of Progress (July 2014) 22. Agronomics 2014: Impact on economic growth and inflation (August 2014) Days of new Government (September 2014) 24. Make in India: Bolstering Manufacturing Sector (October 2014) 25. The Indian Direct Selling Industry Annual Survey (November 2014) 26. Participated in a survey to audit SEZs in India with CAG Office of India (November 2014) 27. Role of MSMEs in Make in India with reference to Ease of Doing Business in Ghaziabad (Nov 2014) 28. Exploring Prospects for Make in India and Made in India: A Study (January 2015) 29. SEZs in India: Criss-Cross Concerns (February 2015) 30. Socio-Economic Impact of Check Dams in Sikar District of Rajasthan (February 2015) 31. India - USA Economic Relations (February 2015) 32. Economy on the Eve of Union Budget (February 2015) 33. Budget Analysis ( ) 34. Druzhba-Dosti: India's Trade Opportunities with Russia (April 2015) 35. Impact of Labour Reforms on Industry in Rajasthan: A survey study (July 2015) 36. Progress of Make in India (September 2015) 37. Grown Diamonds, A Sunrise Industry in India: Prospects for Economic Growth (November 2015) 38. Annual survey of Indian Direct Selling Industry (December 2015) 39. India s Foreign Trade Policy Environment Past, Present and Future (December 2015) 40. Revisiting the emerging economic powers as drivers in promoting global economic growth(february 2016) 41. Bolstering MSMEs for Make in India with special focus on CSR (March 2016) 42. BREXIT impact on Indian Economy (July 2016) 43. India s Exports Outlook (August 2016) 44. Ease of Doing Business : Suggestive Measures for States (October 2016) 45. Transforming India through Make in India, Skill India and Digital India (November 2016) 46. Impact of Demonetization on Economy, Businesses and People (January 2017) 47. Economy on the eve of Budget (January 2017) 48. Union Budget : A budget for all-inclusive development (January 2017) 49. Annual Survey of Indian Direct Selling Industry (February 2017) 50. Worklife Balance and Health Concerns of Women: A Survey (March 2017) 51. Special Economic Zones: Performance, Problems and Opportunities (April 2017) 52. Feasibility Study (socio-economic Survey) of Ambala and Rohtak Districts in Haryana (March 2017) 53. Goods and Services (GST): So far (July 2017) 54. Reshaping India-Africa Trade: Dynamics and Export Potentiality of Indian Products in Africa (July 2017) 55. Industry Perspective on Bitcoins (July 2017) 56. Senior Housing: A sunrise sector in India B: State profiles 57. Rajasthan: The State Profile (April 2011) 58. Uttarakhand: The State Profile (June 2011) 59. Punjab: The State Profile (November 2011) 60. J&K: The State Profile (December 2011) 61. Uttar Pradesh: The State Profile (December 2011) 62. Bihar: The State Profile (June 2012) 63. Himachal Pradesh: The State Profile (June 2012) 64. Madhya Pradesh: The State Profile (August 2012) 65. Resurgent Bihar (April 2013) 66. Life ahead for Uttarakhand (August 2013) 67. Punjab: The State Profile (February 2014) 68. Haryana: Bolstering Industrialization (May 2015) 69. Progressive Uttar Pradesh: Building Uttar Pradesh of Tomorrow (August 2015), 70. Suggestions for Progressive Uttar Pradesh (August 2015) 71. State profile of Telangana- The dynamic state of India (April 2016) 72. Smart Infrastructure Summit Transforming Uttar Pradesh (August 2016) 73. Smart Infrastructure Summit 2016-Transforming Uttar Pradesh : Suggestions for the State Government (August 2016) 74. Rising Jharkhand: An Emerging Investment Hub (February 2017) 75. Punjab: Roadmap for the New Government Suggestions for the Industrial and Socio-Economic Development Focus MSMEs ease of doing business (May 2017) 76. Prospering Himachal Pradesh: A mountain of Opportunities (August 2017) 22

23 Team, PHD Research Bureau Dr. S P Sharma, Chief Economist spsharma@phdcci.in S.No. Officers Name Designation Area 1 Ms. Megha Kaul Associate Economist Economic Affairs Committee (EAC) and Policy Developments 2 Mr. Agraja Pratap Deputy Secretary Developments in India s Infrastructure (National and States) 3 Ms. Surbhi Sharma Sr. Research Officer Developments in Banking Sector, Forex and FEMA Affairs 4 Mr. Rohit Singh Research Associate India s International Trade, Trade & Investment Facilitation Services (TIFS) 5 Ms. Areesha Research Associate Macro-Economic Developments, Agriculture and Rural Development 6 Ms. Neha Gupta Research Associate Global Economic Developments and Impact on India 8 Ms. Abha Chauhan Research Assistant Economic Developments in India s States 9 Ms. Sunita Gosain Secretarial Assistant Secretarial & Administrative processes 23