the net worth criteria for using option strategies to hedge exposures. 21. secondly, the scope of participation based on economic rather than contractual hedging needs to be expanded. here we are on a more difficult territory. with increased integration of the indian economy with the rest of the world, economic exposure affects virtually everybody in the tradable sectors and also outside. today, even a banana grower from nagercoil can complain that her business is affected by an appreciating rupee. to some extent, this gets addressed by the no - underlying - required - hedging that has been enabled both on the otc as well on the exchange - traded segments. but there is also a need to take a re - look at the issues and widen the scope of the present regime and perhaps bring clarity into it. for instance, can we think of permitting corporates to access forex markets upto a multiple of exposures to be contracted during any year without any documentation being insisted upon subject to necessary checks and balances to prevent outright punting? can we redefine “ exposure ” to mean net exposure, i. e., net of payables and receivables for permitting outright purchase or sale with the temporal mismatches being managed through swaps? i would invite extensive debate on these issues. 22. another issue that i would like to flag is the need to rethink on the entities to participate in the forex market. has the indian forex market become a closed club where the behaviour of the market participants is getting too predictable? do we then allow new category of members as market makers, for example, the stand - alone primary dealers or select non - bank finance companies? are we prepared for an open minded debate? bis central bankers ’ speeches 23. now, i come to the second theme of my discussion, that is, opening up of capital account. having declared complete openness on the current account as early as 1994, we thought that we can soon attain capital account convertibility as well. there have been two attempts in the past at charting a path to reach full capital account convertibility : in 1997 and again in 2007. the onset of the east asian crisis of the late 1990 ’ s and the global financial crisis relegated our plans to the back burner. in the aftermath of the crisis, capital account convertibility is no longer seen as a secular objective to be pursued and capital account restrictions are, in certain situations, seen

pace and content of capital account liberalisation will depend upon the future events, but the regulatory regime has to be clear and transparent. a regulatory regime that creates uncertainty and obfuscates imposes tremendous cost on the economy and the society. e. finally, the issue of fair pricing. forex customers, especially from small and medium enterprises and retail segments, have approached us on several occasions highlighting “ high ” charges levied by authorised dealer banks on their forex transactions. not only there appears to be a wide variation amongst the banks in the charges levied on the smaller customers, there appears to be a complete lack of transparency regarding the information on charges levied for such customers. i am aware that fedai has issued a special circular in this regard but i once again urge all banks assembled here to pay due attention to this aspect before calls for regulation of forex rates become more vocal. 33. i wish the conference, whatever is left of it, all success. i also wish each one of you all success in the years to come. as i leave the stage, rather than singing along with frost that we have miles to go before sleeping, i would rather echo tennyson ’ s brook ( read markets ) that will surge along irrespective of men ( like me or any other ) who may come and go. i shall of course continue to watch the developments from the sidelines. good bye. bis central bankers ’ speeches