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Global Banks handling FPI trades

Last week, the large multinational banks told RBI to either become dollar buyers or it should exclude the dollar funds which are used as a settlement of equities. Banks that are handling Foreign portfolio investment (FPI), would require to convert foreign currency into Indian rupees for faster trade settlement, when the treasuries of the corporate would be empty, in such a scenario banks would be left with no choice but to keep the dollar with their headquarters.
Currently, trades on Indian stock exchanges are resolved within two days of their occurrence – a process known as T+2 (an abbreviation for trade plus two days). SEBI, the capital market regulator, has stated that the settlement cycle will be accelerated by one day (to T+1) starting February 25. A stock buyer would receive stocks in a demat account, and a stock seller would receive monies in a bank account just one day after a trade was completed with this method.
“Because a pre-funded market would increase FPIs’ costs, they would choose to book FX in the evening of T or the early hours of T+1.”

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