Archive · 10 Oct 2026
RBI Tightens Forex Derivative Rules, Adds New Reserve Requirements
India’s central bank has changed rules for some trades involving foreign currency and the rupee.
The rules were announced on October 10.
A covered contract that is cancelled cannot be booked again after the directions take effect, though it may still be rolled over when it reaches its end date.
The limit for certain trades made without showing the real-world exposure behind them has dropped from $100 million to $5 million.
Banks must also keep a customer statement showing that the same exposure has not been hedged through another bank.
For some qualifying trades worth more than $2 million, banks must keep cash with the central bank as a reserve.
A separate change reported for banks requires them to meet at least 99% of their required cash reserve each day, rather than 90%, while the overall rate stays the same.
The RBI says the forex measures are meant to support an orderly market and improve risk management.
The Reserve Bank of India announced foreign-exchange measures on October 10 through two circulars, citing orderly market functioning, discipline and risk management.
Covered cancelled rupee-involving derivative contracts cannot be rebooked after the directions are issued, while maturity rollovers remain permitted under existing rules.
The threshold for specified transactions without establishing underlying exposure fell from $100 million to $5 million, including rupee currency derivatives across recognised exchanges combined.
Authorised dealers must retain customer undertakings confirming that the same contracted exposure has not been hedged with another authorised dealer.
For specified current-account hedges, dealers must hold a cash reserve with the RBI equal to 20% of the rupee-equivalent notional amount when it exceeds $2 million; a separate report says daily CRR maintenance rises to 99% from 90%.
- Who
- The Reserve Bank of India announced the measures; authorised dealers, banks and users of covered transactions are affected.
- What
- The RBI restricted rebooking of certain cancelled contracts, lowered specified exposure thresholds, added documentation requirements and introduced a reserve obligation. A separate reported measure tightens banks’ daily CRR maintenance.
- When
- The forex measures were announced on October 10. The rebooking restriction applies to contracts cancelled after the directions are issued; the CRR change is reported to begin with the reporting fortnight starting October 16.
- Where
- India’s foreign-exchange market.
- Why
- The RBI said the measures aim to support orderly market functioning, strengthen market discipline and ensure appropriate risk management. One article also links the measures to pressure on the rupee and speculative activity.
RBI’s stated rationale
Concerns and effects described
Purpose of the forex measures
RBI’s stated rationale
The RBI says the measures are intended to maintain an orderly and transparent market, strengthen discipline and support appropriate risk management.
Concerns and effects described
One article characterizes the measures as a response to rupee pressure and excessive speculation; it says tighter rules could limit flexibility and add costs or scrutiny for market participants.
Impact of the reserve
RBI’s stated rationale
The 20% Foreign Exchange Risk Reserve is a cash reserve imposed on authorised dealers for specified covered contracts.
Concerns and effects described
One article says the reserve could affect banks’ funding costs and derivative pricing, but clarifies that it is not automatically a 20% fee charged to customers.
- Announcing authority
- Reserve Bank of India (RBI)
- Announcement date
- October 10
- Circulars
- A.P. (DIR Series) Circular No. 25 and Circular No. 26
- Specified exposure threshold
- Reduced from $100 million to $5 million equivalent
- Foreign Exchange Risk Reserve
- Cash reserve equal to 20% of the rupee-equivalent notional amount for covered transactions exceeding $2 million equivalent
- Reserve scope
- Specified rupee-involving contracts hedging current-account exposures where the user buys foreign currency against the rupee
- Daily CRR maintenance
- One article reports that the minimum daily maintenance rises from 90% to 99% from the reporting fortnight beginning October 16; the overall CRR rate remains unchanged
