Trade Sector Updates – Falling Exports, TIES, MEIS, Foreign Trade Policy, etc.

Next Generation Treasury Application (NGTA)

Note4Students

From UPSC perspective, the following things are important :

Prelims level : NGTA, Forex Reserve

Mains level : Not Much

In a bid to improve its functioning, the RBI has decided to move to the Next Generation Treasury Application (NGTA) for managing the country’s foreign exchange and gold reserves.

Aspirants must make a note here:

1.Authority managing FOREX in India

2.Components of FOREX

3.IMF’s SDRs

4.Emergency use of FOREX

What is NGTA?

  • The NGTA, according to the RBI, would be a web-based application providing scalability, manoeuvrability and flexibility to introduce new products and securities, besides supporting multi-currency transactions and settlements.
  • It would be supporting various transactions in asset classes like Fixed Income (FI), Forex (FX), Money Market (MM) and Gold.
  • It would be used for managing the foreign exchange reserves in a more efficient way, mitigate risk, achieve operational efficiencies, dealing in various asset classes and reporting.

Objectives of NGTA

The objectives of the proposed system include:

  • dealing in various asset classes (like Fixed Income Securities, Forex, Money Market, Gold);
  • portfolio management; workflow management; reserve management;
  • integration with various third-party and in-house systems; and dashboards, reports, widgets.

Features of NGTA

  • The NGTA shall automatically fetch all the relevant details of a security/contract from a trading platform.
  • It shall support all internationally accepted conventions pertaining today count, interest computation, holiday logic, shut period-dividend, ex-dividend, cash flows, and odd coupon.
  • With respect to transactions in gold, the NGTA shall support purchase, sale, deposit (including rollover and premature withdrawal).
  • On maturity of a gold deposit, there can be exact, under or over delivery.

Back2Basics: Forex Reserves

  • Reserve Bank of India Act and the Foreign Exchange Management Act, 1999 set the legal provisions for governing the foreign exchange reserves.
  • RBI accumulates foreign currency reserves by purchasing from authorized dealers in open market operations.
  • The Forex reserves of India consist of below four categories:
  1. Foreign Currency Assets
  2. Gold
  3. Special Drawing Rights (SDRs)
  4. Reserve Tranche Position
  • The IMF says official Forex reserves are held in support of a range of objectives like supporting and maintaining confidence in the policies for monetary and exchange rate management including the capacity to intervene in support of the national or union currency.
  • It will also limit external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is curtailed.
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