In a 'blow' to liberalisation as old as old wives tales from Delhi ki bhatti, RBI let out a warning from its bag as old hands from Foreign bank desks set out to build treasury positions in Rupee with out Import / Export obligations on behalf of compoany treasuries throughout the country. Right now it may be simpler derivatives, even forwards and cash to play on the weakness in the rupee as the finite returns have quite an attraction for corporate treasuries wilfully blocked from Money maret lending to banks or excessive ticketing in money market mutual funds.
the citi scam of 2010 used such monies thru personal accounts of the bankers concerned in the Equity Capital Markets segment
Business Standard via moneycontrol.com
The rupee has depreciated nearly 16 percent in 2011 against the U.S. dollar.
"RBI was aware that many foreign banks were encouraging speculation in the market. But it could not take any action as most of these trades were done offshore outside its regulatory purview. There was a meeting last month where RBI issued oral warning to some of these banks," a source privy to the discussions with the regulator, told the paper.
Most of these trades were done taking advantage of the difference between the forward premium rate in India and the offshore non-deliverable forward market rates, the report said.
The RBI, on December 15, reduced the net overnight open position limit (NOOPL) of authorised dealers in the foreign exchange market with immediate effect, potentially reducing capacity of market participants for taking trading positions.
