RBI cuts trading hours for forex, bond and money markets

Mumbai: About 10 days after India shuttered itself to help prevent the spread of Covid-19 through densely populated cities and towns, its central bank cited the lockdown to halve the number of trading hours in the currency, bond and money markets that have lately witnessed unprecedented volatility.

The Reserve Bank of India (RBI) said on Friday that these markets will now operate only for four hours — between 10 am and 2 pm. The shortened workdays, applicable in the second and third weeks of April, should help curb wild intraday swings in financial assets.

“The thinning out of activity is impacting market liquidity and increasing (the) volatility of financial prices,” RBI said in a release Friday.

In the past one month, the rupee lost about 4%, hitting record lows at 76.32 a dollar. The local unit closed at 76.17 Friday, down about 0.80%.

Monetary authorities in other Asian countries, including the Philippines, Malaysia and Singapore, have taken similar measures, shortening the workdays in light of the health hazard.

“In order to minimise these risks and to ensure that market participants maintain adequate checks and supervisory controls while optimising thin resources and ensuring the safety of personnel, it has been decided to revise the trading hours for various markets,” the central bank said.

The curbs will be in place between April 7 and April 17, after which the lockdown is expected to ease.

The unprecedented situation created by the Covid-19 outbreak has necessitated lockdowns, social distancing, restrictions on movement of people and non-essential activities, work-from-home arrangements and business continuity plans, the RBI said.

Markets dealing in the currency, central/state government bonds and short-term debt instruments operate between 9 am and 5 pm. Only the repo corporate-bonds market, a window to borrow short-term money by pledging investment-grade bonds, remains open until 6 pm every day.

“The resultant dislocations have adversely impacted the functioning of financial markets. Staff and IT resources have been severely affected, posing operational and logistic risks,” the central bank said.

Trading volumes have shrunk across market segments after New Delhi announced a threeweek nationwide lockdown, scheduled to end mid-April.

Daily trading volumes have less than halved in the over-thecounter dollar-rupee market to about $2.5-3 billion, compared with the equivalent of $8-12 billion before the imposition of the lockdown.

Similarly, daily trading volumes in government bonds plummeted to about a third of the usual. On Friday, sovereign bonds worth Rs 21,000 crore changed hands.