Mumbai: India plans to allow foreign-exchange settled rupee derivatives trading in specially designated centers as it tries to deepen the local market.

The non-deliverable forwards trading will take place in the International Financial Services Centres, the Reserve Bank of India said Friday. GIFT City in Prime Minister Narendra Modi’s home state of Gujarat is currently the only operational venue.

Trading in the onshore market has been shrinking at the expense of offshore rupee market, Governor Shaktikanta Das told reporters. For instance, London has surpassed India’s financial capital Mumbai to become the top centre for trading rupee, according to the Bank for International colonies last month.

“This is going to be analogous to another offshore exchange where only non-residents or GIFT based entities can trade, as per the existing regulations,” said Madhavi Arora, an economist at Edelweiss Securities Ltd in Mumbai.

The RBI’s plan also follows the increasing influence of the non-deliverable forwards market on local trading. The rupee was held hostage in 2013, the year of the taper tantrum, by offshore speculators when India’s forex reserves dwindled. The currency tumbled along with its emerging-market peers.

For instance, average daily trading volumes for rupee in the UK soared to $46.8 billion in April, a more than fivefold jump from $8.8 billion in 2016, according to a BIS report released last month. That exceeded the $34.5 billion recorded in India.

The RBI will also allow local banks to freely offer foreign currency prices to non-residents, RBI said.

“This may further narrow down the arbitrage between onshore and offshore markets and induce lower volatility in rupee emanating exclusively from offshore markets,” Arora said.