Latest news with #BhaskarDutta
Bloomberg
3 days ago
- Business
- Bloomberg
India's RBI Said to Have Sold at Least $5 Billion to Boost Rupee
By and Bhaskar Dutta Save India's central bank sold US dollars across both onshore and offshore currency markets this month to prop up the rupee as it weakened toward a record low, according to people familiar with the transactions. The Reserve Bank of India sold at least $5 billion worth of the US currency, one of the people said, asking not to be identified as the information is private. The RBI didn't immediately respond to an email requesting comment on the matter. If the trend persists, it could become RBI's largest month of net dollar sales since January.
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Business Standard
04-07-2025
- Business
- Business Standard
Indian insurers urge IRDAI to revamp bond valuation to boost debt market
Insurance companies are seeking a shift to a method that values bonds individually, for example differentiating between debt issued by state-run firms and private companies Bloomberg By Bhaskar Dutta and Saikat Das Indian insurers have asked their regulator to revamp bond valuation norms, according to people familiar with the matter, a move that could encourage greater participation in the corporate debt market. Insurance companies are seeking a shift to a method that values bonds individually, for example differentiating between debt issued by state-run firms and private companies, the people said, asking not to be named as the talks are private. The current approach assigns similar valuations to bonds with the same rating, they added. The push for a new methodology comes at a time when Indian insurers' assets are rising, driving increased investment in debt securities. Easing valuation rules could improve liquidity in India's relatively shallow corporate bond market, they said. As India's economy expands, the nation's insurance market will be the fastest growing among the other G20 nations, global reinsurance company Swiss Re wrote earlier this year. Insurance companies are making the request to shield their so-called unit-linked insurance plans, or ULIPs, from potential losses, the people said. These plans combine investment in financial markets with life insurance coverage. Growing market The discussions around the valuation models signal a growing market, although a potential shift calls for careful risk management on the part of insurers, said Anil Gupta, senior vice president at ICRA Ltd., an affiliate of Moody's Ratings, that provides valuations for fixed-income instruments. The current method — — the so-called matrix valuation — prices illiquid bonds to comparable securities that are more regularly traded. As a result, many bonds in an insurer's portfolio end up being valued the same way, the people said. This can lead to losses when the bonds are sold in the market, especially as the method doesn't distinguish between securities issued by state-owned firms and private issuers, they added. In contrast, the preferred security-level valuation method accounts for the unique characteristics of each instrument. This shift would better align valuations with actual market transactions and conditions, they added. While the security-level method is more reflective of market conditions, there are potential risks involved depending on the kind of securities being considered, said Gupta. If bonds being chosen are illiquid, then the method runs the risk of overstating the value of a portfolio, he said.
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Business Standard
12-06-2025
- Business
- Business Standard
RBI winds down offshore currency tool reflecting shift in strategy
By Subhadip Sircar and Bhaskar Dutta India's central bank has scaled back its use of a key tool it deployed last year to counter the strong dollar, according to people familiar with the matter, reflecting a change in the authority's intervention strategy under its new leadership. The Reserve Bank of India 's short dollar positions in the non-deliverable forwards market have fallen sharply to below $5 billion, down from a peak of about $70 billion late last year, the people said, asking not to be named discussing private matters. The central bank had relied heavily on these offshore contracts in 2024 as the dollar surged, driven by a strong US economy and Donald Trump's presidential win. However, this year, the rupee has moved more freely against the greenback, suggesting a shift toward a more hands-off approach to currency management amid global trade uncertainty. 'A central bank cannot keep increasing its short forward book without losing the efficacy of this tool. So to prepare for further volatile events, the RBI will reduce its forward book substantially, if not completely,' said Dhiraj Nim, currency strategist at Australia & New Zealand Banking Group Ltd. An email sent to the RBI seeking comment on the matter didn't immediately receive a response. Using offshore non-deliverable forwards has a number of advantages for central banks, including potentially lower costs and the fact that they don't drain official reserves. That's because the NDF contracts allow the central bank to influence the rupee's levels without actually selling large amounts of dollars. Such interventions can also act as a signal of intent in the spot market, thus boosting the rupee when markets are volatile. The RBI's heavy reliance on the offshore market last year was in sharp contrast to its usual practice of curbing swings in the rupee onshore. Under Governor Sanjay Malhotra, who took office in December, the central bank has brought a large portion of its derivatives intervention to the local market. The reduction in the offshore exposure accounts for most of the recent drop in the RBI's overall forward dollar positions, the people said. As of April, the total forward book — covering both local and offshore markets — stood at about $73 billion, down from a record $88.8 billion in February. More than half the book was within the 3-month to 1-year maturity bucket, indicating a large portion of the book had been brought onshore. However, the RBI isn't worried about the potential drain on its reserves from these dollar sales. 'We are not unduly concerned about that,' Governor Malhotra told reporters on Friday after cutting interest rates for a third straight meeting. 'If there are opportunities, we can build reserves.' India's foreign exchange reserves have rebounded to $692 billion, nearing the record high of $705 billion hit in September. Still, the RBI will likely need to continue adding to its reserves over the next three months to cushion any impact of $14.7 billion in maturing short positions through July, Nomura Holdings Inc. analysts wrote in a note. More than two-thirds of the contracts in the overall forwards book were in the three months to one-year bucket and are unlikely to be rolled over, according to DBS Bank Ltd. The RBI's unexpected decision to cut banks' cash reserve ratio and free up ₹2.5 trillion in liquidity was also aimed at offsetting likely liquidity strain from unwinding short positions, according to the lender. When the RBI sells dollars to banks, it absorbs rupees, potentially tightening financial conditions. 'Liquidity infusion via the CRR cut would also aid this process and ensure it is non-disruptive, while shielding the currency,' said Radhika Rao, senior economist at DBS Bank.
Business Standard
30-04-2025
- Business
- Business Standard
Indian insurance companies planning $41 bn trade switch to bond forwards
Insurers are in talks with authorities to convert about Rs 3.5 trn ($41 bn) worth of rates derivative contracts into bond forwards. Such contracts offer investors the opportunity to own the securities Bloomberg By Subhadip Sircar and Bhaskar Dutta India's insurance companies are ready to embrace bond forwards agreements that start trading on Friday, the latest step to enhance the liquidity and sophistication of the nation's $1.3 trillion government debt market. Insurance companies are in talks with the authorities to convert about Rs 3.5 trillion ($41 billion) worth of rates derivative contracts into bond forwards, people familiar with the matter said. Such contracts offer investors the opportunity to own the securities, rather than just receiving a cash settlement, giving insurers greater certainty in managing interest rate risks. A key point of discussion between insurers and regulators is the treatment of existing contracts and the complex documentation processes required for the migration, the people said, who declined to be identified as the talks are private. The shift from FRAs, as the rate derivatives are called, will happen gradually, they said. 'Over time, the insurance industry is likely to transition away from FRAs in favor of bond forwards,' said Churchil Bhatt, executive vice president for investments at Kotak Mahindra Life Insurance Co. They provide a hedge against fluctuations in yields and also offer investors the opportunity to get delivery of bonds, he said. The Reserve Bank of India and the Insurance Regulatory and Development Authority of India didn't respond to emails and calls seeking comment. Insurer Demand The bond forward product will cater to the continuing demand for long-term securities from investors like insurance companies, said Gopal Tripathi, head of treasury at Jana Small Finance Bank Ltd. Banks can undertake long positions without any limits and covered short positions through bond forwards only for hedging, the Reserve Bank of India said in its guidelines.
Bloomberg
25-04-2025
- Business
- Bloomberg
Indian Assets Underperform as Geopolitical Worries Hit Sentiment
By and Bhaskar Dutta Save Sign up for the India Edition newsletter by Menaka Doshi – an insider's guide to the emerging economic powerhouse, and the billionaires and businesses behind its rise, delivered weekly. Stocks and bonds tumbled in India, as traders braced for a potential worsening of the geopolitical situation with neighboring Pakistan.
