Based on this article USDINR forward premium has spiked as there is abundant USD liquidity in the country due to dollars repatriation:
"Banks were told by the authorities to protect their dollar deposits on concern that U.K.-based Cairn Energy Plc will move to seize India’s offshore assets after winning an arbitration ruling"
"The move has led to a sudden flood of dollars in India’s banking system, with the state banks staying away from receiving the greenback in the forwards market. As a result, the one-month forward premium on the currency pair jumped to as high as 10%, "
"There are no cash receivers in the market, everyone is a payer,” said Anil Kumar Bhansali, a treasurer at Finrex Treasury Advisors. Dollar “cash levels are high. So near-term premiums are also high."
Has forward premium increased because the implied USD rate has risen due to excess dollar liquidity in the country? and why local banks stay away from receiving USD (long USDINR) in the forward market?