NDF is a forex derivative instrument, traded over the counter and operated in currencies that are freely convertible unlike the rupee. The rising volumes of rupee trade in the NDF abroad could adversely affect value of the domestic currency.
Listing out other concerns like low retail participation, lack of financial literacy and financial inclusion, Chidambaram said such issues need to be addressed urgently. Improvement of financial sector competitiveness and optimal use of exchange infrastructure for investment classes are other areas which need urgent attention, he added.
Referring to the recommendations of the Financial Sector Legislative Reforms Council (FSLRC), Chidambaram said as passing legislation on the suggestions will take time, it has been decided to implement the non-legislative ones first. On the ordinance giving more powers to Securities and Exchange Board of India , Chidambaram said if the Standing Committee does not submit its report by end of the current session, the government will have to promulgate the ordinance for the third time. (PTI)