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Indian forex market : A brief history

Indian Forex Market: A Brief History

To understand the history of the forex market in India, we have to trace its origin to the year 1978, when the RBI permitted banks to participate in intra-day trading in foreign currency exchange. This was a landmark move to give birth to a dynamic foreign exchange in India.

This initiative fuelled several opportunities to make profit for buyers and sellers. Consequently, banks began quoting two-way prices against the Rupee and the volume of trade began to grow. The value of Rupee was defined by the RBI in terms of a weighted pool of currencies of India's trading partners. Since the RBI was buying and selling an extensive volume of Pound Sterling, its quotes became critical.

The 90s

During the nineties, economic reforms enabled the change in the exchange rate of the Indian Rupee. Such reforms invited a new age of the Indian forex market. A notable milestone in the Indian forex history was the appointment of an Expert Group committee on forex currency in the year 1994. As a result, banks received the freedom to carry out forex market development initiatives such as fixing trade limits, the ability borrow and invest funds in the international stock markets etc. Corporate organisations were enabled to take advantage of financial instruments such as interest rates and currency swaps in the currency exchange market.

The NSE
 
The first stock exchange that was formed in India was the National Stock Exchange (NSE) that issued forex currency futures and forex trading in India. To support close alignment between exports and imports, the government established the EXIM scrip scheme. This provides support to exports. Under the Liberalised Exchange Rate Management System (LERMS) RBI instituted a system of dual exchange rates. As per this system, 60% of earnings could be collected and the balance returned.  

The
foreign exchange currency trading in India is growing at a good pace although it is known that the forex market is still in the nascent phase in the currency exchange market. A significant point to note is that a considerable amount of the foreign exchange was contributed by NRIs and the Indian population living abroad. The way ahead to amplify the volume and success of forex trade is to take cognizance of the forex signals and build sustainable development plans.

The foreign exchange currency trading in India is growing at a good pace although it is known that the forex market is still in the nascent phase in the currency exchange market. A significant point to note is that a considerable amount of the foreign exchange was contributed by NRIs and the Indian population living abroad. The way ahead to amplify the volume and success of forex trade is to take cognizance of the forex signals and build sustainable development plans.

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