Reserve Bank of India (RBI) Governor Sanjay Malhotra has called on the Clearing Corporation of India (CCIL) to broaden its horizons and explore facilitating trading and settlement services for a wider range of currency pairs beyond just the US dollar and the Indian rupee (USD-INR). This directive aligns with the RBI's broader objective of internationalizing the rupee.
Speaking at an event commemorating the 25th anniversary of CCIL, Malhotra emphasized the importance of developing the necessary infrastructure to support trading and settlement in currency pairs beyond USD-INR. CCIL currently facilitates settlement only in USD-INR. The Governor's call is rooted in the ongoing efforts to promote the Indian rupee on the global stage through various measures, including bilateral currency arrangements, rupee trade settlement mechanisms, and the opening of special vostro accounts.
The internationalization of the rupee has been a key policy objective for the past few years, with India actively pursuing agreements with several countries to enable bilateral trade settlements in local currencies. This move aims to reduce reliance on the US dollar, lower transaction costs, and promote trade with partner countries.
In addition to expanding its currency offerings, Malhotra urged CCIL to enhance its product and service offerings for retail investors in the forex and government securities markets. He specifically mentioned the Forex Retail and RBI Retail Direct platforms, emphasizing the need to ensure a seamless customer experience and robust system capabilities. Currently, there are 300,000 retail investors enlisted with the g-sec trading platform.
Malhotra also highlighted India's unique position as the only major economy where government securities and repo transactions are traded on an anonymous electronic platform with near real-time dissemination of trade information, efficiently settled through a central counterparty. He noted that India's trade repository was established well before the G20 recommendation for reporting over-the-counter derivative trades.
Furthermore, the Governor encouraged CCIL, which he described as a blend of a risk management company and a tech company, to embrace innovation and leverage emerging technologies to enhance efficiency, scalability, performance, security, and cost reduction. He underscored the importance of stability, growth, and trust for the RBI as well.
This push for diversification comes at a time when corporate India is increasingly diversifying its funding sources. Nearly half of the resources raised in FY25 have come from sources other than traditional bank lending, highlighting the need for a more comprehensive and accessible financial market infrastructure.
The CCIL plays a crucial role in reducing settlement risk and expanding foreign exchange trading by providing access to more counterparties. It also offers real-time information on trade status, facilitates settlement and funds flow, eliminates the need for counterparty confirmations, enables the use of local currency as collateral, and leverages infrastructure and collateral.
By expanding its services beyond USD-INR, CCIL can contribute significantly to the internationalization of the rupee, reduce reliance on a single currency, and provide greater flexibility and efficiency for businesses and investors engaged in cross-border transactions.
