RBI may Reinstate Currency, Debt Market Operating Hours

According to the reports, the Reserve Bank of India might be taking the reinstatement of the working hours of debt and currency markets into consideration. The operational hours that were cut down due to Covid-19 lockdowns and other restrictions might be reverted back to their pre-pandemic schedule.

The timings for debt and currency markets were curtailed for almost a year and a half because of the pandemic. This resulted in reduced trading volumes and provided less room for the traders to plan their trades and adjust positions.

Before the pandemic, generally, the currency and debt markets used to open at 9 AM and close at 5 PM. In April 2020, because of lockdown, these timings were cut down and modified to open at 10 AM and close by 3:30 PM.

These timings were partially reinstated during November 2020. Though RBI was reportedly eyeing to restore it fully the resurgence of Covid-19 cases at the beginning of 2021 didn’t leave much room for the Bank. Now the reports are coming in again that full reinstatement of original timings might happen.

What do reports say?

The recent news reports say that RBI might be thinking about restoration of timings of currency and debt markets as the normalcy is returning back. The Bank reportedly considered a few participants’ viewpoints in this regard.

The numbers published by Clearing Corporation of India Limited (CCIL) reveal increased volume in the debt market. On Oct 1 2021, government bonds worth INR 403 billion were traded in the bond market.

In 2020, when Covid-19 dislocated the financial markets, volume in Govt. Bonds had fallen down to INR 100 billion. Now, as per the CCIL reports, volumes are seen magnifying.

There have been no comments from the Reserve Bank of India on the matter yet.

Expert’s comments

The industry experts believe that if such restoration of timing happens, it will bring more elasticity to the market as more participants and employees will be returning back to their trading terminals.

Debt market experts also think that with increased immunization of Covid-19 and normalcy returning back, the volumes in these markets can shoot up. Currently, in the debt market, we are already seeing a 4 fold increment from the lowest volume of government bonds in 2020.

The currency market experts also hold similar opinions regarding increment in volumes. Some experts believe there is still the potential to further add up the volume by up to 40% from here in the currency market if normal working hours are restored.

Key takeaways

RBI had cut down the timings of currency and debt markets owing to Covid-19 restrictions and lockdowns in the first half of 2020.

The operating hours of bond and currency markets are reportedly expected to restore back to normal working hours.

Trading volumes are expected to increase and the overall activity in the currency and bond market will increase as per the industry experts.

More flexibility will be available for traders and other market participants to plan their positions and execute their orders.

Volumes in currency and debt markets have already increased multiples folds since the lows of 2020 but can see further increment if normal timings are reinstated.

 

FAQs

What were the normal working hours of the bond and currency market before the pandemic?

Generally, bond and currency markets used to operate between 9 AM and 5 PM before the Covid-19 pandemic. These hours were curtailed in April 2020 to 10 AM to 3:30 PM.

What are the functions of Clearing Corporation of India Limited?

Clearing Corporation of India Limited is an organization that manages settlement and clearing on behalf of the exchanges. The functions of CCIL include ensuring transparency and liquidity in financial markets with an aim to reduce operating risk.

What are Government Bonds?

Government Bonds are instruments traded in the debt market. These are issued by both the State and the Central Government. Return on such bonds is received by way of a fixed percentage of interest. It is like a loan given to the issuer of a bond. If you are buying a bond issued by Central Government, it implies you are giving a loan to Central Government and you get fixed interest in return for a certain number of years and in the end, you get can redeem the bond at the end of its tenure to get back the principal amount.