The foreign broking firms opine that the Indian currency could become commanding currency in Asia. This reckoning came a day after an expert committee made out a case on Monday for making the rupee fully convertible before the end of 2008.
According to the foreign forex broking firms, once the rupee becomes fully convertible, the local currency has potential to become dictating currency of Asian within a decade. This could result in the launch of several new financial products.
Normans Martin Brokers is the UK-based RP Martin Group’s recently floated forex broking firm in India. The joint venture between Normans Ross and the RP Martin group, the firm is based in Mumbai which is home to the largest financial market in India. The RP Martin group has a 40% stake in the firm.
“We decided to venture into this business in India, considering that the rupee could become fully convertible in the near future. We plan to introduce products such as futures and options apart from interest rate swaps for local players,” said David Caplin, the CEO and MD of the RP Martin group.
He added that the Indian economy, by itself though still not fully globalized, is quite strong and robust enough to handle a fully convertible rupee. This could be attributed to the well-enforced judiciary and the democratic set up. Given that full convertibility is brought in, domestic forex broking firms will have to look at consolidating between themselves since the move could invite the entry of newer players from overseas markets.
However some bankers feel that there may not be a pressing need to make the rupee fully convertible, until the time the contours are specified. For instance, there could be areas demarcated like OBUs where transactions could be allowed. They say that the regulations for these segments could be different.
According to the expert committee, the key deficiencies of the Indian financial market component include the absence of a liquid currency market and a full range of currency derivatives.
The committee wants to see a currency spot market with a minimum transaction size of Rs 10 million, accessible to all financial firms. According to the committee, an Indian rupee settled exchange traded currency derivatives should also be created with trading in futures, options and swaps on currencies, accessible to all.