RBI Shortens Forex, Money Market Trading Hours Amid Covid-19 Lockdown

The Reserve Bank of India has decided to shorten trading hours for foreign exchange and money markets products, in light of challenges posed by lockdowns imposed to curb the spread of Covid-19.

The shortened hours, which will be in place from April 7-17, apply to products that do not trade on recognised exchanges.

India is currently in the midst of a 21-day lockdown, scheduled to be lifted on April 14. The lockdown has meant that a number of traders are working from home and, at times, facing difficulties in executing trades.

In a notification on Friday, the RBI said social distancing norms and restrictions on movement have led to dislocations and have adversely impacted the functioning of financial markets. “Staff and IT resources have been severely affected, posing operational and logistic risks. The thinning out of activity is impacting market liquidity and increasing volatility of financial prices,” the central bank said.

As per the circular, the trading hours stand revised as follows:

• Foreign currency/Indian rupee trades, including derivatives: Timing revised to 10 a.m.-2 p.m. from 9 a.m.-5 p.m..
• Rupee interest rate derivatives: Timing revised to 10 a.m.-2 p.m. from 9 a.m.-5 p.m.
• Government bond markets: Timing revised to 10 a.m.-2 p.m. from 9 a.m.-5 p.m.
• Tri-party repo in government securities: Timing revised to 10 a.m.-2 p.m. from 9 a.m.-3 p.m.
• Commercial paper and certificate of deposit: Timing revised to 10 a.m. -2 p.m. from 9 a.m.-5 p.m.
• Repo in corporate bonds: Timing revised to 10 a.m-2 p.m. from 9 a.m.-6 p.m.
• Call money/term money: Timing revised to 10 a.m.-2 p.m. from 9 a.m.-5 p.m.
• Market repo in government securities: Timing revised to 10 a.m.-2 p.m. from 9 a.m.-2.30 p.m.

The decision comes a little over a week after Prime Minister Narendra Modi imposed a 21-day lockdown across the country. While traders were allowed to go in to work under the essential services categories, trading activity thinned out considerably.

This was starkly visible in the trading session on March 24, when the government bond markets saw no trade for 32 minutes.

This is a good move, said K Harihar, treasurer at First Rand Bank. “The market has become very thin and trading activity is down due to governance rules across many banks. In this kind of a market, low volumes can only add to the volatility,” said Harihar.

Harihar said the only uncertainty that remains is whether permitted hours for large value transactions via RTGS will also be shortened. To be sure, the RBI circular said RTGS and NEFT timings remain unchanged.

In the foreign exchange markets, while bilateral deals could still continue, they would not be recorded via the clearing corporation immediately, Harihar said.

Bhaskar Panda, senior vice president for treasury at HDFC Bank also sees the RBI’s decision as positive. While atleast half the staff is working from home, systems on which the treasury departments operate are not available at home. “This will ease the pressure considerably.” Panda added that market trading thins out after 2pm and hence cutting off trading hours at that point is valid.