Search the Internet          Tips  Sites: Finance, Investment

Banks set to begin dollar clearing in India

BS Banking Bureau in Mumbai

Armed with the approval of the US Federal Reserve, domestic banks are set to kick off clearing of all inter-bank dollar transactions on Indian shores in the first week of November.

The Clearing Corporation of India Ltd will be the nodal agency for clearing all inter-bank dollar transactions.

CCIL chairman R H Patil said clearing of the first lot of dollar transactions is expected to take place on November 6.

"On Saturday we sent letters to all participating banks for setting up a settlement guarantee fund," he said. The fund will have a corpus of around $100 million.

Once CCIL starts dollar clearing in India, the Indian banks will save both in transaction cost as well as time. The volume of forex transactions vary between $2-3 billion daily and about 85 per cent of these are dollar transactions.

"Once we are comfortable with clearing of dollar transactions, we will clear other currencies too," Patil said. After dollar, euro is now the second most important currency in inter-bank transactions.

At present, all inter-bank dollar transactions are cleared in the US on a gross basis through correspondent banking arrangement with various banks.

Once CCIL starts clearing dollar transactions here, all inter-bank transactions will be netted out here before settling in the US. This will bring down the number of transactions substantially.

Besides, the cost per transaction will be halved - from $4 to $2. ABN Amro will be the lone correspondent bank for all transactions.

CCIL started dry runs for its forex clearing operations on October 14. In the run-up to the launch, it had a meeting with member banks on October 25, addressed by Reserve Bank of India deputy governor Vepa Kamesan.

Powered by

ALSO READ:
More Money Headlines