In order to cater to the global demand for financial products such as non-deliverable forwards in Rupee, the International Financial Services Centres Authority (IFSCA) looks to make GIFT-IFSC as the hub for internationalisation of rupee derivatives.
IFSCA Chairman Injeti Srinivas, informed that rupee derivatives is one of the most traded currencies globally and that the recent measures by the Reserve Bank of India (RBI) will help India tap the offshore rupee derivatives market.
"On an average about $50 billion of daily volumes in offshore derivatives market show there is a lot of international demand for non-deliverable forwards (derivatives) in Rupee," Srinivas said at a panel discussion on 'The Future of Global Financial Centres: GIFT IFSC' organised by Bloomberg LP on Thursday.
While acknowledging that India is still making baby steps in offshore rupee derivatives, Srinivas mentioned that there can be "finite internationalisation of Rupee, as the country is still not mature to achieve full internationalisation." RBI has already given its nod for trading rupee derivatives at the GIFT-IFSC.
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The exchange-traded derivatives to be allowed at GIFT-IFSC will provide international players such as Foreign Portfolio Investors, Indian companies, IFSC banking units, global banks and NRIs investors and custodians to hedge in the currency.
India's domestic regulator RBI finds it feasible to allow offshore Rupee derivatives, hence, Srinivas believes that, India can host rupee derivative trades for foreign investors through the IFSC.
The growing interest for rupee derivatives is evident from the data, which shows that the value of Rupee derivatives traded in offshore exchanges such as Dubai, Singapore and Chicago is on par with the transactions in domestic exchanges such as the BSE, NSE and MSE.
On the other hand, the value of non-deliverable Rupee forwards traded in offshore markets far exceeds the value transacted onshore. At this juncture, this makes it a fit case to tap the international investors.
Trading of rupee derivatives in GIFT-IFSC will help tame the currency
IFSCA, Srinivas informed, is also working aggressively on channelizing green finance from global players into India through GIFT-IFSC. "Rough estimates suggest that in next 10 years, looking at the UN's Sustainable Development Goals objectives and commitments at Paris climate agreement, the investments required will be around $4 trillion and about 50 per cent has to come as global capital inflows. IFSC will attract and channelize this global investments into India. This country has the ability to absorb that flow of money," Srinivas said.
Meanwhile, besides the other financial activities, GIFT IFSC is also witnessing a growing traction from Alternate Investment Funds, which are lining up for the launch. Dipesh Shah, head development & international relations at IFSCA informed that about 25-30 AIFs are likely to come in the next 2-3 months. "About 25-30 AIFs are at very advanced stages of discussion. We expect about 25-30 such funds to come in the next 2-3 months," Shah said.