68. 85 on august 28, 2013. of course, india ’ s weak macro - economic fundamentals, especially high current account deficit, that existed then, exacerbated the situation. in order to stem the sharp and excessive depreciation of the rupee, india resorted to a mix of policy measures including forex market intervention, monetary tightening through reduction in banks ’ access to overnight liquidity adjustment facility ( laf ), increase in marginal standing facility ( msf ) rate and increase in daily minimum cash reserve ratio ( crr ) maintenance requirements, coupled with other policy measures, such as, gold import restrictions, special dollar swap window for psu oil companies, special concessional swap window for attracting fcnr ( b ) deposits, increase in overseas borrowing limit of banks, disallowing banks from carrying proprietary trading in currency futures / exchange traded options, etc. additionally, fii investment limit in government debt was enhanced by us $ 5 billion to us $ 30 billion in june 2013 to attract greater inflows. positive developments during 2014 – 15 lending support to the rupee the various measures taken by the reserve bank in conjunction with the government of india helped in restoring stability to the forex market with the rupee recouping most of its losses during september - october 2013. the rupee exhibited greater two - way movements during 2014 on the back of sustained fii inflows, especially in the debt segment. as compared to major currencies as well as some of the other emerging market peers, the indian rupee has exhibited greater stability during the recent months. positive factors including continued fii inflows to the domestic equity and debt markets ( around us $ 39. 3 billion in 2014 – 15 so far ), sustained fdi flows, political stability, fiscal consolidation ( lower fiscal deficit target of 4. 1 per cent of gdp in 2014 – 15 vis - a - vis realized fiscal deficit of 4. 5 per cent of gdp in the previous year ), continuation of reform measures by the new government at the centre, significant reduction in current account deficit during the first half of the current financial year ( 1. 9 per cent of gdp ), improvement in macro - economic parameters, such as, cpi inflation ( 5. 1 per cent in january 2015 ) and gdp growth ( 7. 4 per cent during aprildecember 2014 as per new methodology ) have contributed towards the stability of the rupee. india ’ s forex reserves have also increased

and exchange traded segments of the currency futures market. it is generally understood that exchange traded currency futures, rather than being used by the real sector are mostly being driven by speculative interests. currently, the liquidity in exchange traded market is confined to very short - term. if such products are to be positioned as a credible hedging products then the liquidity has to extend beyond short - term. these issues need to be addressed going forward for development of a deep and liquid currency derivatives market for hedging currency risks. use of options while there is increasing interest amongst end - users in using currency options, not many banks in india have scaled up their expertise in this area and the option activity remains confined to just a few banks. this prevents development of an active options market. it is necessary that banks enhance the necessary skill - sets in this product which has been catching the attention of the end - users. while this will give a fillip to market development, the end - users ’ hedging needs will also be met in a more competitive environment. liberalization of net open position limits ( nopl ) of banks another important area is the net open position limits ( nopl ) of banks. large open forex positions have systemic risk implications and need to be monitored closely. however, relaxation in these limits is essential to deepen the currency market as excessive restriction on speculation hinders the development of the market. thus, a fine balance has to be maintained between the need to minimize risk and deepen the forex market in india. data collected by rbi reveals that, at least in the last few months, banks have healthy bidirectional views on rupee ( in contrast to general unidirectional bias ), which have helped promote healthy markets. polling for financial benchmarks rbi has already chalked out a programme to move over to trade - based financial benchmarks from a polling - based system in a gradual and non - disruptive manner. in the last few months, stung by the regulatory actions abroad, many banks have shown a great amount of reluctance to participate in the polling process in india. it needs to be recognized and borne in mind that that the move from a polling based system to trade - based system is a carefully calibrated process and cannot be accelerated at the cost of bringing the system to disruption. bis central bankers ’ speeches it is, therefore, necessary, in the interests of market integrity, for the active players to continue to participate in the polling process till